Second Strategy: Where There is Accumulation, There Will Be Explosive Power

What does this mean? It means that if a price oscillates back and forth within a relatively narrow range for several consecutive days, the longer the oscillation lasts and the more solid the candlestick pattern becomes, the greater the force will be when the breakout occurs. In our daily trading of cryptocurrencies, we must pay attention to such opportunities.

The reasoning is quite simple; it is like the magma in a volcano. Before a volcanic eruption, the magma must contend with the hard crust of the Earth. The longer it is suppressed, the greater the explosive force will be. This is often summarized as "either you erupt in silence or you perish in silence."

The market condition is also easy to understand. An index that is experiencing narrow oscillations means that whether one is going long or short, there is basically no profit to be made in this area, and any small profit is eaten up by transaction fees, losing the meaning of closing positions. Therefore, the open contracts will inevitably accumulate more and more. At this time, the major players either actively collect chips waiting for a counterattack or seize the opportunity to distribute chips during the oscillation to prepare to leave space for their opponents. As time drags on, the transfer of chips will gradually be completed. When the equilibrium in the accumulation area is finally broken, the upward surge or downward plunge will naturally manifest, and at this moment, three forces will help drive this unleashed market:

Large players are either actively collecting or watching for a chance to distribute. The horizontal development in narrow oscillations brings forth a storm on the clear horizon, while turbulent undercurrents stir beneath the calm surface of the sea. The longer the accumulation area is stretched along the time axis, the greater the explosive power will be, whether upward or downward.

When the equilibrium of the accumulation area is finally broken, three forces will push the market changes to become more intense. One is the small retail investors who have gained momentum and are relentless in adding positions, chasing victory; another is the forced sellers who have been deeply trapped and are now cutting losses, which adds fuel to the market. The last group is the onlookers who see a clear trend and immediately become trend followers, acting in accordance with the market.

Because the brewing of the accumulation area requires time, waiting for a breakout requires patience. If the direction of the accumulation area is unknown, entering recklessly poses a risk greater than the potential reward. Prolonging the wait may lead to impatience, and when one becomes numb from self-observation, suddenly the market moves in the opposite direction, resulting in being trapped.