$ETH In the cryptocurrency market, many newcomers rely on observing K-line charts to make judgments when entering the market. This is the most basic yet practical technical analysis method.
Below are some commonly used judgment logics in practical situations.
1. Understand the trend direction
$BTC Upward structure: If consecutive bullish candles appear, and each bullish candle's closing price is higher than the previous one, it indicates that the bulls are dominant and the market is bullish.
Downward structure: If consecutive bearish candles appear, and the closing price keeps declining, the bears control the market, and the trend continues to fall.
Reversal signals: Patterns like hammer, inverted hammer, engulfing pattern, morning star, etc., usually appear at the end of a trend. When you see these signals, pay attention to reversal opportunities.
2. Support and resistance are key
Support zone: A price level that has been tested multiple times but not broken is called support.
If the price bounces back from support and shows a bullish pattern (like a hammer), you can consider entering a long position.
Resistance zone: A price level that has been tested multiple times but faced obstacles is called resistance.
When the price touches resistance again and shows a bearish pattern (like a bearish engulfing), you can consider entering a short position.
3. Volume matches the trend
Up + increasing volume: If the transaction volume increases during an uptrend, it indicates strong buying power in the market, making the trend reliable for going long.
Down + increasing volume: If the transaction volume also increases during a downtrend, it indicates strong selling power, making shorting a safer choice.
4. Typical K-line signals
Hammer: A long lower shadow appearing at the end of a downtrend, usually signals a reversal upwards.
Inverted hammer: Although the shadow is on the upper side, it still indicates a weakening downtrend and a rebound opportunity.
Three white soldiers: Three consecutive strong bullish candles indicate that the bulls are making significant efforts, and the trend is very strong.
Bullish engulfing: After a large bearish candle, a small bullish candle appears that engulfs it, usually indicating that the downtrend is about to end.
5. Validate with indicators
Golden cross of moving averages: When the short-term moving average crosses above the long-term moving average, it usually represents the beginning of a bullish trend, which is a very classic trend signal.
MACD golden cross: When the short-term MACD crosses above the long-term MACD, the market momentum leans towards the bulls.
6. Risk is always the priority
Regardless of whether to enter the market or not, the most important point is always to control risk.
Before each entry, make sure to set a stop-loss, ideally placing it outside the key support/resistance levels to avoid significant losses due to a single mistake.
