Author: Mac, Crypto Trader

Translator: Felix, PANews

Is technical analysis too complex to understand? Are the various indicators dazzling? Crypto trader Mac, with ten years of experience, believes trading is "simplicity at its best" and provides three lessons. Here are the details.

Most people think trading is far too complex. As someone who has spent over ten thousand hours observing the markets in the past decade, this article can help you save a lot of time and money: grasp some basic knowledge that people seem to often forget, and you can go a long way on your trading journey.

Hopefully, after reading this article, you will be able to quickly assess within three seconds of opening a chart whether it's worth buying. This method applies to stocks, commodities, and cryptocurrencies. Forex is less applicable, but if you're still trading forex, you need to reconsider your life choices.

The Problem

Most people click buy without even looking at the chart. They hear news about a particular stock. Someone on a forum says a certain cryptocurrency is going to skyrocket. Friends suggest buying it. So they buy.

Then they hold these assets for up to six months, during which the price just moves sideways without progress, or worse, the assets start to "hemorrhage." They can only sit and watch their money evaporate, not understanding what went wrong.

This is why index funds are so popular. Not because they are the best investment, but because most people have no idea what to look for when they open a chart. So they simply give up and directly buy the S&P 500 index (SPY).

This is not to say that technical analysis is always 100% correct, because it is not. But trading is all about probabilities; as a trader, your job is to do everything possible to increase your odds.

What does increasing odds mean? Here it is explained in a way a five-year-old can understand.

Rules of Thumb:

• Chart shows an upward trend = worth buying
• Chart shows a sideways trend = may not be worth buying
• Chart shows a downward trend = not worth buying
• Chart is transitioning from downward to upward = may be worth buying

You don't need any indicators; it all depends on market structure.

The first thing to do after opening a chart: zoom out. Switch to a weekly chart, or a higher time frame if possible. What you want to see is the actual overarching trend, not the noise on the hourly chart.

Secondly: observe the market structure.

What is market structure?

Basic Knowledge of Market Structure

• A chart in an upward trend will consistently create higher highs and higher lows.
• A chart in a downward trend will consistently create lower lows and lower highs.

Now, here comes the key point. What does it mean when the market structure "breaks"?

Imagine a candlestick chart continuously rising, making higher highs and higher lows; everything seems great. Then one day, the price drops and breaks the most recent "higher low." That low is the breaking point. This should have been a price level for buyers to re-enter, but they don't. The sellers crash right through it.

It works the same in reverse. A candlestick chart in a downward trend, continuously making lower highs and lower lows. Then one day, the price breaks the most recent "lower high." The sellers should have pushed the price down there, but they don't. The buyers break through the resistance.

This is also a market structure break, but this time it is bullish. This could be the start of a reversal.

This is absolutely the most important point you can learn from this article: when the patterns of highs and lows are broken, it means something is changing.

More practical examples:

PYPL: PayPal Monthly Chart

The monthly chart of PYPL is a great example of market structure. On the left side, you can see a clear upward trend. The candlestick chart is making higher lows and higher highs, with prices continuing to rise.

At the peak in 2021, it is clear that the market structure has broken: the chart no longer makes higher highs and higher lows, but instead breaks below the "higher low" from six months earlier. This "higher low" was supposed to hold, but it didn't. The buyers lost control, and the sellers took over. This is a clear market structure break that indicates we should sell and not touch it for a while. (The downward trend begins)

Fast forward to today, the candlestick chart continues to make lower lows. Many will say, "PYPL is undervalued, I believe in PYPL." Please, the chart tells a completely different story; if you really want to believe in something, maybe you should believe in God.

Next, I'll give some more practical examples so you can understand everything and start applying it to your trading.

Coinbase Weekly Chart

Now let’s look at the Coinbase weekly chart.

• On the left, there is a clear market structure break (support level broken), leading to lower lows --> downward trend begins.
• The chart hits the lowest low; thereafter, the price may create lower highs, then begins to consolidate before finally breaking that lower high. This marks an upward market structure break, creating the first higher high, confirming the upward trend.

Note the labeled "buy" position; you don't have to buy early. It's perfectly fine to buy "a little late." In fact, it is advisable to buy slightly later. Buying after the upward trend is confirmed is much better than buying too early, hoping for a downward trend to end. I lost a lot of money before understanding this, so don’t make the same mistake.

BTC 2023-2026

Now let’s look at Bitcoin's price, where you can simultaneously see both bullish and bearish market structure breaks.

In 2023, Bitcoin's price hovered between $15,000 and $20,000, consistently making lower highs and lower lows while almost everyone was saying, "Cryptocurrency is dead." Then, the price broke above the previous "lower high" around $25,000 (green arrow on the chart). This breakout changed everything. Since then, it has been making higher highs and higher lows, soaring to $125,000. Notice that even if you entered "late," you could still make money. You don’t need to buy at the $15,000 bottom; you just need to see a structural reversal around $25,000 to $30,000, and then buy. Even if you were late by a few weeks or months, you'd still be in profit.

Now look to the right. Bitcoin's price peaked around $125,000, and then it started forming lower highs. Then the price broke below a "higher low" near $85,000 to $90,000 (the red arrow on the chart), and the structure has just been broken downward. The current price is around $66,000.

Of course, it’s not to say Bitcoin will drop to zero, but from this chart, it’s clear the trend has turned bearish. The best case is to return above the breakout point, but until then, dreary sideways consolidation and torturous price movements will dominate (likely even worse than the current situation).

Now, let’s look at more examples.

Boring Chart

Here’s a chart that has seen no movement for over five years. The same sideways range, with no market structure breakthroughs, just boring sideways movement. Don’t buy and hold something that looks like this; you might as well take your money to Las Vegas and bet it all on a black horse.

To succeed, remember these three points:

"Garbage Cryptocurrency"

Lesson One: Don’t try to be a hero by "catching the bottom." This will cost you a lot of money and energy. If in a confirmed downward trend with no signs of a rebound, the best course of action is to sell, stop loss, and look for another target. I used to be that person, holding onto positions and watching them fall for months, just because I firmly believed "this is the bottom." It was not the bottom at all. The chart kept making lower lows, just refusing to admit it. If the structure shows it’s going down, then it is going down. Get out quickly.

All good things must end

Lesson Two: The market will deceive you time and again. If the market structure has just turned bullish but you’re worried you bought at the top, I have one suggestion: zoom out. Switching to a higher time frame can help you better control emotions and prevent impulsive and foolish trades. Countless times I panicked at the four-hour chart, then zoomed out to the weekly chart only to find that nothing had changed. The structure remained intact; it was just that I was watching too closely. That's when fundamental analysis comes into play. If the fundamentals or market narrative can support your technical analysis, then you are probably making a good trade.

Hynix Bull Market

Lesson Three: It’s okay to enter a bit late, but don’t be ridiculously late. At this point, you might ask: How do I know if I’m too late? Well, the answer is hard to say. It takes years of crawling on the candlestick chart to discern, and even after many years, you could still be wrong. Technical analysis can only take you so far; if you combine it with news/narrative analysis and fundamental analysis, you'll go further. A good rule of thumb is: If the candlestick chart has made 3-4 higher highs and higher lows in a two-week or monthly timeframe, and the price is significantly above where the structure shifted, then you may have missed the best opportunity. While this is not always true, it’s highly likely. Instead of chasing after what has already happened, wait for a pullback to create a "higher low" before entering.

Conclusion

• Chart shows an upward trend = worth buying
• Chart shows a sideways trend = may not be worth buying
• Chart shows a downward trend = not worth buying
• Chart is transitioning from downward to upward = maybe worth buying

Three lessons:

• Don’t be a hero trying to catch the bottom
• Trust your analysis
• It’s okay to enter late, but not too late

Related reading: Starting from $100, Dissecting the Three Dimensions and Five Levels of Trader Advancement

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