Within a year, turning 10,000 into 1 million through cryptocurrency trading can only be achieved by rolling funds and investing in strong altcoins!
A method I have personally tested, turning 10,000 into over 1.8 million in 11 months, nearly a 180-fold increase!
If you also want to share a piece of the pie in the cryptocurrency world, take a few minutes to read this article; you are just one step away from a million!
There are many common situations of emotional manipulation. The following three are the most common.
1. Intraday volatility.
When a coin experiences intraday volatility, it is actually the main force taking advantage of retail investors. During the ups and downs, if retail investors buy in large numbers, it is highly likely that the coin price will plummet significantly. If retail investors panic and sell, the coin price is likely to rise after the volatility.
2. Chasing high and selling low.
Chasing high and selling low is also the most common emotion. Behind the chase is the fear of missing out and the fear of being deeply trapped.
The emotion of chasing high and selling low is also easily exploited by the main force; when more people chase high, it is often easy for the main force to offload. In the morning, there may be significant inducement to buy, and by the afternoon, a sharp drop can be shown to retail investors, causing them to lose more than 10% in a day. The main force may just take advantage of this trend to wash out retail investors, causing panic selling. It should not be the coin price that chases high and sells low; it should be the trend. Retail investors' half-knowledge makes them a meal for the capital.
3. Negative and positive news.
Another point is that both negative and positive news will be utilized by the main force; negative news can suppress the coin price, and it can also be interpreted as negative news being exhausted, allowing the coin price to rise significantly. Similarly, positive news can boost the coin price or can be used to sell at a higher price.
Therefore, how to interpret positive and negative news is ultimately determined by capital. How capital operates is actually based on market reactions and retail investor actions. When retail investors panic, capital greedily buys in, and when retail investors become greedy, capital immediately exits. Utilizing emotions to manipulate the market is done to perfection by capital and can be said to be easily done.
Remember! Fighting against emotions is the only way out for retail investors.
Bitcoin has skyrocketed, bringing some previous trading strategies back to life. The simplest and most intuitive may be the MACD trading strategy of the semi-god of the cryptocurrency world, claiming to achieve 400 times returns in a year.
To say it simply, it is merely about finding opportunities for continuous divergence in MACD.
The above figure is a good example that fully illustrates the two core points of this trading strategy: continuity and divergence.
What counts as continuous?
When MACD is above the zero axis, if a peak appears and does not drop below the zero axis before rising again to create another peak, or if it drops below the zero axis and soon crosses back above to form another peak, this is known as continuity.
What counts as divergence?
The peaks of MACD are gradually decreasing, but the stock price is gradually rising. This inconsistency between the MACD trend and the stock price trend is known as divergence.
Of course, inconsistencies in trends can be divided into two situations: the indicator declines while the stock price rises, which is top divergence; the indicator rises while the stock price declines, which is bottom divergence.
The above figure is an example of top divergence; the Hang Seng Index also showed bottom divergence before the market trend began on 924.
The semi-god's trading strategy is to look for opportunities where the MACD indicator shows continuous divergence.
First, change the default parameters of MACD from 12 and 26 to 13 and 34, then look for continuous divergences between peaks and troughs that differ significantly.
Shorting on divergence, going long on bottom divergence, and using the ATR with a parameter of 13 for stop loss.
Causes of divergence:
From the two screenshots above, it is indeed a good opportunity to short on top divergence and go long on bottom divergence. Everyone can target what they are concerned about.
Test the targets to see if this strategy can capture some relatively large opportunities.
During this process, two problems may arise: first, the platform's built-in MACD indicator only includes the fast and slow lines and the histogram, without additional features.
Identifying divergence is very inconvenient when validating the effectiveness of divergence signals against historical data; secondly, after backtesting data, it is highly likely that
It will be found that divergence signals are quite effective, but bottom divergence is relatively more effective than top divergence.
How to solve the problem of identifying divergence signals, we will discuss later; for now, let's analyze the causes of divergence and why bottom divergence occurs.
The signals are more effective.
First, we need to look at the code for the MACD indicator and analyze the construction logic of this indicator.
1. DIF: EMA(C,12)-EMA(C,26), COLORRED;
2. DEA: EMA(DIF,9), COLORGREEN:
3. MACD: (DIF-DEA)*2, COLORSTICK;
That's right, the original MACD indicator is that simple; implementing the so-called 'king of technical indicators' MACD only requires three lines of code. The first line calculates the difference between two moving averages of different time periods based on the closing price and displays it as a curve.
In the second line, calculate the average of the difference between the two moving averages from the previous step and display it as a curve;
In the third line, subtract the two and magnify the result, then display it as a histogram.
So even if we haven't studied the design principles of the MACD indicator, we can analyze the causes of divergence just from its code.
If a top divergence occurs, it means that the peaks of MACD are decreasing while the stock price is rising and reaching a new high. If this situation occurs,
This indicates that the value of MACD is decreasing.
The value of MACD is derived from the difference between DIF and DEA, thus indicating that the gap between DIF and DEA is narrowing.
DEA is the average of DIF, which indicates that DIF is gradually decreasing or the rate of increase is slowing. At the same time, due to the smoothing effect of DEA, when DIF's increase narrows, DEA is still rising, leading to a reduction or even reversal of the difference between the two.
DIF is the difference between two moving averages of different periods. When DIF narrows or the rate of increase slows down, it actually indicates that the difference between the two moving averages is decreasing.
Short-term moving averages are sensitive, while long-term moving averages are smooth; therefore, when the difference between the two narrows, it can be seen as the slope of the short-term moving average starting to approach the slope of the long-term moving average.
The slopes of the short-term and long-term moving averages begin to converge, which may be due to two reasons: stock prices have fallen or the increase has slowed. The condition for top divergence is that the stock price is still rising and reaching a new high.
The price is still rising and reaching a new high, so the reduction in the difference between the two actually indicates a slowdown in the increase, meaning stagnation has occurred, and the price can no longer rise.
The same derivation process can conclude that the cause of a bottom divergence is a stagnation in the decline.
After a long period of volatility, once a trend is formed, it is difficult to reverse. After a top divergence, some profit funds may cash out, but those who didn't believe at first are now gradually entering as they just started to believe. Although momentum has weakened, the trend remains; top divergence can still lead to further peaks as the stock price may create higher highs.
Similarly, after a bottom divergence occurs, it is also possible to form a lower low. However, compared to upward movements, downward movements often take less time and have larger amplitudes. Especially after several rounds of panic selling, people have become numb to negative news. When there is nowhere left to fall, what remains are mostly steadfast holders. Combined with the psychological advantage of buying at low prices, this often triggers a strong rebound, making the signal of bottom divergence easier to realize.
Identifying divergence
When the stock price reaches a new high but the indicator does not, it is a top divergence, indicating that the strength of the bullish trend is weakening, and the market may experience a top reversal; when the stock price reaches a new low but the indicator does not, it is a bottom divergence, indicating that the strength of the bearish trend is weakening, and the market may experience a bottom reversal.
Since this is a 'possible reversal,' it indicates a left-side trade. If the trading involves contracts, it is understandable why the semi-god can achieve such high returns using this strategy.
Of course, since it is a left-side trade, there may be situations of 'tops within tops, bottoms within bottoms, and divergence followed by divergence.' Therefore, in the semi-god trading strategy, a stop loss based on ATR is particularly added to avoid trading against strong trends, which could lead to risks of losing everything or liquidation.
There are both entry signals and stop-loss rules; logically, this is a relatively complete trading strategy. But the problem is that if we rely on the naked eye to identify continuous divergence in MACD, the efficiency will likely be very poor.
Indicators that are box-like tools. Most of them have a flashy name, giving the illusion that one can profit consistently simply by following the indicator signals.
Although there are relevant indicators in TradingView to assist trading, such tools are rare in domestic trading software. However, we all know that for different markets, different targets, and different time frames, the trading signals generated must be treated differently.
In a strong trend market, the KDJ indicator may remain in the overbought and oversold range; in a volatile market, moving average indicators may repeatedly cross. Relying solely on a single signal may lead to substantial losses after a period of time.
Thus, technical indicators should actually be viewed as auxiliary tools, primarily enhancing efficiency. For example, for continuous divergence in MACD, if we can achieve automatic recognition of this pattern through technical indicators, we can better grasp such opportunities.
The recognition of divergence has three key points: trigger mechanism, time frame, and judgment method. In a previous article, we introduced a simple method for recognizing divergence.
This recognition method is very simple; it uses the MACD cross as a trigger mechanism, with two crosses defining the time frame, and then judging whether divergence has occurred based on the trends of DIF and stock prices at the time of crossing.
This is actually a kind of opportunistic method; for a general overview, it can still be used, but if we want to base it on the semi-god's approach,
Using trading strategies based on identifying signals is obviously incorrect.
For example, continuous top divergence refers to several gradually decreasing peaks, and there is no retracement below the zero axis between the peaks, or only a few that retrace below the zero axis.
Therefore, its trigger mechanism requires first finding a peak, then looking back to see where the previous peak was, checking if there is any part below the zero axis between the two peaks, and if so, checking whether the number of bars below the zero axis exceeds the threshold. Finally, determine whether both peaks are declining while the corresponding stock price is still rising.
Similarly, continuous bottom divergence requires a trough to appear first, then backtrack to the previous trough, checking whether there is any part above the zero axis between the two troughs. If so, also check whether the number of bars above the zero axis exceeds the threshold, and finally determine whether both troughs are rising while the stock price is still falling.
Comparing with the screenshots provided at the beginning of the article, we no longer need to manually draw lines to measure whether continuous divergence has occurred. By using custom technical indicators, we can identify whether MACD has diverged on the sub-chart and connect the peaks and troughs. On the main chart, we connect the highest or lowest prices corresponding to the peaks and troughs of MACD, making it easy to identify divergence at a glance.
Of course, since this is a custom indicator, the conditions for continuous divergence can be set according to personal preferences, such as whether two or three peaks and troughs need to appear continuously, the number of bars between peaks being below the zero axis, and the differences between consecutive peaks and troughs reaching a certain threshold. All of these can be adjusted accordingly.
Identifying trends
Trading strategies based on divergence will enter the market before the trend is completely confirmed, exhibiting left-side trading characteristics; therefore, a stop loss based on ATR is indispensable as an important component of the semi-god trading strategy.
However, we can also combine other technical indicators to further reduce the potential risks brought by left-side trading. MACD measures the strength of a trend, while the trend itself can naturally be measured using moving average indicators.
Generally speaking, most trends are identified based on the crossover of short-term and long-term moving averages. However, there is a longstanding problem: if the two time parameters are too close, the two moving averages may frequently cross, leading to a lot of invalid signals; if the two time parameters are too far apart, the entry and exit timing will be severely delayed.
Therefore, we can adopt a method: choose a personal favorite time parameter and then select different moving average algorithms to derive the fast and slow lines.
For example, we first calculate MA10 using the closing prices, and then calculate EMA10 of MA10, thereby mimicking the calculation principle of DIF and DEA, obtaining two fast and slow lines, and then formulating buy and sell signals based on the intersections of these two lines.
Of course, this method, compared to traditional dual moving averages, although it only has one time parameter, still inevitably faces the issue of needing to filter out invalid signals. The market is mostly in a state of volatility, so we can use whether it is overbought or oversold as a filter for the moving average cross signals.
There is a saying that 'the most people losing money in a bull market.'
Thinking back now makes sense. BTC keeps reaching new highs, why is that? Let's list some common mistakes made by retail investors that lead to losses.
1. No research, blindly following trends.
2. When the capital is small, there are too many positions.
3. After incurring losses, failing to understand the situation in depth or to cut losses in time.
4. After incurring losses, choosing to lie flat, without continuous follow-up, feedback, and optimization of the holding strategy.
In fact, as long as we continuously track, provide feedback, and optimize through ongoing research and learning, it is possible to reduce losses and increase profits. A clear pattern is that when Bitcoin slightly drops (2-3%), altcoins generally plummet; when Bitcoin slightly rises (3-5%), altcoins generally skyrocket.
Many beginners may forget that at the same price level, after a drop, it needs to rise more to return. For example, buying at 10 and dropping 50% to 5 means it needs to increase by 100% to break even. I am currently preparing to take a position in a project that is likely to surge in the short term, and doubling my investment is not a problem. Friends interested in spot trading but lacking direction can like and leave a comment.
