Rising from the ruins of liquidation, I finally saw clearly the tug-of-war behind the candlestick patterns.
The scene from that early morning five years ago is still vivid in my mind. Amidst the red alarm sounds of the exchange, I watched as my assets of 6 million vanished in three hours, feeling as if I was nailed to the cross of reality. At that moment, I thought I was completely finished.
But it was that failure that made me truly understand that the cryptocurrency market is not a casino, but a battlefield. After borrowing 120,000 as capital to start again, I spent a lot of time summarizing failure cases, learning various trading methods, and eventually grew my funds to 70 million within 90 days. Today, what I want to share is not some magical trading strategy, but my understanding of the essence of market price fluctuations.
Why do prices rise and fall? It's simple, yet very few truly understand.
When we open the trading software and see that fluctuating candlestick line, have you ever thought of a fundamental question: why does the price go up or down?
The answer is actually very simple: when buying demand exceeds selling supply, the price rises; when selling supply exceeds buying demand, the price falls.
This principle seems to be understood by everyone, but few can truly feel these changes in power during actual trading. Most people are confused by various technical indicators and news, ignoring the fundamental market supply and demand relationship.
Taking the Bitcoin bull market of 2020 as an example, I will guide you to understand the changes in the forces of bulls and bears behind the candlestick chart.
Discrepancies and hesitations before the bull market starts
Looking back at the starting point of the 2020 bull market, the market was actually full of discrepancies. When the price first broke through $12,500, the movement was still hesitant, and there were many overlapping candlesticks on the chart.
This overlapping candlestick pattern indicates that there is bilateral trading in the market, with bulls and bears being evenly matched, and neither side completely dominating. I could feel at the time that some main players believed the bull market had begun and planned to continue buying; while others believed that a breakthrough above $20,000 was needed to confirm the bull market, so they chose to short as they approached this psychological level.
Near key levels, smart money will not recklessly enter with large positions. They wait for confirmation signals during pullbacks, rather than going all in when first touching support or resistance levels. This patience is precisely what ordinary traders lack.
What is the real signal of a bull market?
When the price strongly breaks through the historical key position of $20,000, it only pauses slightly near $23,000, conveying two important messages:
Firstly, the main players who had short positions have been forced to stop-loss and exit. They realize that once $20,000 is broken, the market may welcome a rapid rise, and smart traders do not go against the trend.
Secondly, institutions that have already entered long positions see the breakthrough of $20,000 and realize that a real bull market may have begun. Above $20,000, there are no obvious resistance levels, and they start to actively buy on any slight pullback.
At this time, what are most retail investors doing? They are afraid to buy because they feel the price has risen too high, and some even blindly short. This is the reason why the market often disappoints the majority—when the trend arrives, most people cannot understand the changes in the market.
Characteristics of a healthy bull market structure
In the early stages of a strong trend, there are almost no counter-trend candlesticks on the candlestick chart. Every small pullback is supported by a large amount of buying, without significant retracement. This is a typical feature of the early stage of a trend.
When the price rises from $20,000 to $40,000, why does it pause? Because some early entrants start to take profits, and they are only willing to buy again during a deeper pullback. At the same time, short sellers begin to tentatively short at the psychological level of $40,000.
For trend traders, the end of the adjustment period is a good time to follow the main players into the market. Unfortunately, most retail investors think that a decline means a trend reversal and choose to short instead, missing the best entry point.
Warning signals of trend exhaustion
In the late stages of a bull market, price behavior will show significant changes. In a healthy uptrend, every breakthrough of previous highs will generate new buying power because the bulls believe the trend remains strong.
However, when the trend approaches its end, even if the price breaks through previous highs, bearish candlesticks will immediately appear, indicating a lack of follow-through strength in the breakout. Why? Because the main players have already entered at low levels and are now taking profits rather than continuing to buy.
I remember at that time near $60,000, there were two consecutive failures to break through previous highs. This clearly indicated that bullish power was exhausted, and the trend might reverse. However, many retail investors not only failed to recognize this signal but instead chased the price higher during the breakout, resulting in being stuck at the peak.
The tug-of-war between bulls and bears within the trading range
When the trend enters a consolidation phase, the market will form a trading range. Within this range, both bulls and bears believe there is trading value, but their strategies are completely different.
Main players only buy at the bottom of the range and sell at the top; while retail investors often chase highs and cut losses repeatedly within the range. Worse still, false breakouts frequently occur within the range, and many cannot resist the temptation of breakouts, resulting in repeatedly being slapped in the face.
In the trading range, long trend candlesticks may sometimes appear, seemingly indicating strong momentum, but in reality, it may be due to a temporary lack of opposition. For example, a long bearish candlestick does not necessarily represent strong bearish power, but may just indicate that bulls are temporarily waiting for a lower price.
My understanding of the essence of the market
Years of trading experience have made me realize that sensing the strength of the bulls and bears is more important than memorizing various patterns. Many people are obsessed with head and shoulders, double tops and bottoms, etc., but do not understand the power comparisons behind these patterns, leading to repeated failures in practice.
The market is like a battlefield, and candlesticks are the footprints left by the bulls and bears. To survive in this market, one must learn to read these footprints and keep pace with the main players.
So, why do most retail investors lose money? From my observation, there are mainly two reasons:
Firstly, there is a lack of technical skills. Many people cannot even understand basic candlestick signals, let alone feel the changes in market forces. They rely on lagging indicators like moving averages and MACD, while ignoring the most fundamental price action itself.
Secondly, it is a psychological issue. Even when they see clear trading signals, many retail investors hesitate to act due to fear or go against their trading plans due to greed. They trade with emotions rather than logic.
My personal advice
As a trader who has been in this market for many years, I would like to give you a few sincere suggestions:
Do not get obsessed with complicated indicator systems. I have seen too many people addicted to various 'strategies' and 'magical indicators,' resulting in effective backtesting but failures in real trading. The most effective tools are often the simplest—the price itself is the best indicator.
Learn to feel the changes in the forces of bulls and bears. In different stages of a trend, the comparison of bull and bear powers has obvious characteristics. When a strong trend initiates, bullish power gradually strengthens; during the trend, buying pressure continues to flood in; in the late stages of the trend, bullish power exhausts while bearish power strengthens; in the reversal stage, bears begin to dominate; and within the trading range, the forces of bulls and bears are relatively balanced.
Trade with logic rather than emotions. The market is always right; it is we who are wrong. When you find your judgment does not align with market trends, do not stubbornly insist on your views, but rather admit your mistakes in time and adapt to market changes.
Investing in cryptocurrencies is not easy, but as long as we grasp the essence of the market and overcome psychological weaknesses, we can find our stable profit-making methods in this highly volatile market. I hope my sharing helps you avoid detours and achieve stable profits as soon as possible.
Follow Ake, and I will help you understand more firsthand information and knowledge about the cryptocurrency market at precise points, becoming your navigation in the crypto world. Learning is your greatest wealth!
