In the midst of strategizing, we decide the outcome from a thousand miles away. Hello everyone, I am Lin Chao, a global financial market observer, focusing on cryptocurrency market analysis, bringing you the most in-depth trading information analysis and technical teaching.
In last week's article, Lin Chao repeatedly analyzed the signs that the market is about to start, providing a macro-level analysis of the direction and reasons for the large-scale trend. Fortunately, the market has developed as we expected, following the planned trajectory. Friends who are familiar with Lin Chao know that I never engage in unprepared battles. Every market entry, whether for long-term trends or short-term trades, will always have a trading plan prepared in advance. This is also the secret to why Lin Chao has survived in the market for decades. In fact, I have received many private messages from friends asking how to build their own trading system and how to plan a trade. Everyone should have their own trading logic; differences in capital, risk tolerance, and even social class will all affect the formulation of trading plans, so trading plans must be unique to each individual. There is no perfect method in this world that suits everyone. Last week, Lin Chao mentioned that I would set up a short-term long position plan. In today's article, I will detail the reasons for this plan and the execution steps, hoping to help everyone in their future trading.
The big background narrative is that on October 30, there may be expectations of an interest rate cut by the Federal Reserve. After the release of the CPI data, through comparative analysis of the CPI data, Lin Chao concluded that before any interest rate cuts, there will be a wave of upward short-term market movement (for details, please refer to the previous article "Will the CPI Release Sound the Horn for a Bull Market?"). Combined with the possibility of an early end to the "tapering" expectations, the short-term trend must be upward.
Having determined the major trend, how do we formulate a detailed plan? This requires us to analyze the short-term candlestick patterns to gauge market sentiment. Some friends who are not familiar with technical analysis may not understand why Lin Chao was so determined to set up long positions in previous articles.
In fact, before this market maker's rally, we could clearly find clues for early positioning from the candlestick patterns.
Looking at the daily index of ETH, after nearly two weeks of consolidation, we can clearly see that the candlestick index has completed two bottom tests. The biggest advantage of a double bottom pattern is that it allows us to definitively identify where the strong support level is in the short term. After nearly a month of corrective movement, we assess that the market sentiment is currently numb to declines and cautious about rises. Additionally, after the sharp drop on October 11, the long positions in the market have almost been liquidated, so the market maker will definitely act contrary to the prevailing sentiment. Based on the recent macro narrative, with expectations of a Federal Reserve interest rate cut on October 30 and the cessation of tapering, we anticipate upward market movement. Lin Chao has repeatedly told everyone that trend trading means waiting on the necessary path of the index, waiting for the market to move as we expect. Combining the above information analysis, once the daily index has completed two bottom tests and begins to rise, until the index reaches the midpoint of the W pattern, we can determine the best and most stable entry point, which is in the range of 3970-3990.
Why am I so certain that this is the best entry point? We can extend our analysis from the daily level to the hourly level, where the market maker has a very obvious trial action before the rally. In a zero-sum game, your profit is always someone else's loss. The market maker is no exception; before the rally, the main force will repeatedly test the market's reaction to minimize capital loss during the rally. Specifically, this is reflected in the candlestick index: the market maker first makes a wave of upward movement, then quickly sells, waiting for the market's reaction. From the hourly chart below, we can clearly see the market maker's testing before the rally through the long upper shadow. When the market maker sees that there is no significant reaction from the market (and the candlestick index enters a consolidation phase), only then will they confidently inject large amounts of capital. The major trend is derived from the minor trends; first, we determine the direction of the major trend, observe market sentiment, and then look for entry points in the minor trends while setting stop-loss and take-profit levels in the overall plan. Thus, the entire process forms our short-term trading plan.
Of course, Lin Chao's trading plan is not suitable for everyone. Today, I am analyzing the formulation of this trading plan merely as a reference; you can fully integrate it into your own plan formulation process. You still need to complete your own plan based on your capital, understanding of the market, risk tolerance, etc. If this can help you, feel free to share, comment, or leave a message. I also wish everyone can go further on the path of trading.
If you are feeling lost—unable to understand technical analysis, unsure how to read the market, not knowing when to enter, unable to set stop-losses, not understanding take-profits, randomly increasing positions, getting stuck while trying to catch the bottom, unable to hold onto profits, missing market opportunities… these are common issues for retail investors. Lin Chao can help you establish the correct trading mindset. A single profitable trade is worth more than a thousand words; finding the right direction is better than repeatedly facing losses. Instead of frequent operations, it is better to strike precisely, making each trade more valuable.
The success of investment depends not only on choosing good targets but also on when to buy and sell. Preserving capital and making good asset allocations are essential for steady progress in the ocean of investments. Life is like a long river flowing into the sea; what determines victory or defeat is never just the gains and losses of a single pass or a moment, but rather planning before action and knowing when to stop to gain.
The global market is ever-changing, and the world is a whole. Follow Lin Chao to gain a top-tier global financial perspective.
This article is merely a personal opinion and does not constitute any trading advice. The cryptocurrency market carries risks; invest cautiously!
For real-time consultation, feel free to follow the public account: Lin Chao on Cryptocurrency.
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