The five-sided rule of the currency circle
This article is a pure dry goods technology sharing my personal original post, which is a trading rule that I have stepped into the financial securities market in the past 10 years, including but not limited to (US stocks NASDAQ, Hong Kong stocks Hang Seng, Shanghai and Shenzhen A, and today's cryptocurrency industry), which is called the five-sided rule.
As the name suggests, the five sides include the macro side, the technical side, the news side, the data side, the emotional side, and the copycat side.
The five-sided rule applies to the cryptocurrency industry, including futures contract trends, short- and medium-term day trading, and hotspot spot trading. Below I will subdivide and analyze the five-sided rule, if it resonates, thank you for your likes and collections!
First, the macro aspect
We specifically refer to the financial market here, mainly the NASDAQ index (IXIC), the S&P 500 index (SXP), the Dow Jones index, the Hong Kong Hang Seng index, and the CSI A index (with a general correlation). Of course, in November 2020, there was a temporary liquidity crisis in the crypto market due to the FTX crash, and during that time, the crypto market did not follow the mainstream macro market trend, but the trading volume was sluggish and sideways. However, systemic risk (black swan event) is only a very small probability event, and the market trend of the vast majority of the currency circle is closely related to these macro markets.
With the opening up and legalization of the cryptocurrency industry in Hong Kong, it has also brought a mysterious force from the East to the benign development of the cryptocurrency industry. At the same time, it also allows Hong Kong to have its own place in the cryptocurrency industry.
So whether we are doing trend trading, intraday trading, or scalping (ultra-short-term) trading, we can start to operate synchronously at 9:30 a.m. (East 8 District time) during the day, and the relevant token transactions (contracts, spots, etc.) in the currency circle will start to fluctuate at 4 p.m. (East 8 District time), and the U.S. market will also fluctuate from 9:30 p.m. (summer time) to 0:00 p.m. Other times that are not related to the macro market are mostly sideways. The altcoin market usually appears on Saturday and Sunday.
In short, with the benign development of the currency circle, the connection with the macro market is getting closer and closer, and it is a good auxiliary for you to grasp the trends of the macro market and form a resonance with the currency circle.
Second, the technical aspect
The technical aspect is a relatively broad scope that contains a lot of theoretical and practical experience.
The two schools of technical theory that I personally prefer are the representative harmonic pattern of trading on the left and the chart structure of trading on the right.
In a volatile market, it is suitable to use the left side of the transaction to buy the bottom and touch the top, which will avoid the emotional head in the frequent shock market, which will lead to unreasonable transactions caused by poor emotions.
Even if your entry position is not good, as long as the position is well managed and the direction is correct, you can finally turn losses into profits and obtain good profits.
It is often said that it is forbidden to chase the rise and kill the fall, but in fact, the real right-side homeopathic trading is "chasing the rise and killing the fall" homeopathic trading. However, it is particularly important to note that there will often be false breakthroughs in actual trading, which will infinitely wear out your principal and mentality, so experienced trading veterans on the right side will carefully monitor the market in real time at important pressure levels and support levels, and only after confirmation will the real direction come out, which is what I often say, the first breakthrough you don't chase, wait for him to walk the structure for at least 1 hour, and then decide whether to enter. If you break through the second time and step back on the previous pressure support level and continue to move in the direction of the original breakout, then you can enter the market decisively, because the market will not lie to you a second time!
2. The second aspect of the technical side is the specific indicators of the disk, such as MACD, BOLL, EMA, VOL, RSI, OBV and so on. Personally, I like bare k + chart + liquidity + 1 indicator (VOL), VOL is the volume indicator, the higher the volume proves the greater the volatility, so the more opportunities for speculation.
3. Message data plane
Behind trend lines, double tops, and head and shoulders patterns, there are fundamental factors that drive them. As the name suggests, news data that has a decisive impact on the market trend is also a very important "indicator" that we need to refer to when making transactions.
1. The first thing that needs to be paid attention to on the news side is the Federal Reserve's interest rate decision meeting, which also affects the trend of major macro markets. The most basic theory you have to know is that the liquidity of fiat currency will be relatively reduced when raising interest rates, so the funds invested in the risk market will naturally not be very broad, just as the current plate rotation is not a general rise, but a rotation of individual leading coins, because the funds in the market are very concentrated, and there is no situation where a hundred flowers bloom during the quantitative easing policy.
2. News of major events or public events. For example, the Qatar World Cup held in December 2022, the market has been hyping the sports and football sector since mid-2022, and the leading CHZ in the sports sector has maintained a daily ultra-high trading volume before the opening ceremony of the World Cup.
3. Transparent supervision. For example, the upcoming transparency and legalization of Hong Kong cryptocurrency transactions has brought some vitality to the related tokens in the Hong Kong sector, especially the CFX that everyone likes, with an astonishing 2000% increase in 2023!
News data is very important for the crypto market because it drives volatility in the crypto market. Technical trends aside, news data is like fuel, which drives the crypto market forward!
Large institutional traders, small traders, veterans of crypto trading, or just starting out rely on the same news data to determine market movements, because without any news data, the market will not fluctuate at all!
For example, some time ago, Silicon Valley Bank declared bankruptcy, and you are holding shares in this bank.
What is the first thing you do when you hear this? Do you anticipate the change in this company? What do you think about the change in this company, the attitude of other people?
Finally, we often pay attention to some data that affect the short-term trend of the market, such as the US non-farm payrolls, unemployment rate, and the upcoming CPI data, which will affect the decision of the Federal Reserve's interest rate meeting.
Fourth, the emotional aspect
All investors and traders, from beginners to seasoned veterans, have found that when the whole market goes crazy and you can't work properly, it's often when a major top or bottom of the market is formed. Day trading is more prone to emotional stress. As a day trader, you should always be in control of your emotions, especially in the face of important news, reports, international events or crises.
Sentiment poles are closely correlated with major market tops and bottoms. This correlation can be confirmed by specific facts such as news headlines, magazine articles, TV and radio reports, and anecdotes of traders. Studying these can determine whether the market is approaching a bottom or a top. When all the news is bullish, the top of the market is imminent, and the spread of bearish news means that the bottom is coming. Many of the day trading indicators discussed in this book translate this sentiment into a market approach.
When the market sentiment is extremely greedy, it is the time for you to liquidate and sell, and when the market sentiment is extremely panicked, it is the best time for you to buy all positions.
Buy in no one's interest, sell in the crowd!
Today's BTC direct profit of 400 points, ETH more than 30 points of profit
Fifth, cottage noodles
Altcoins make people happy and worried. Because the liquidity of cottages is generally low, but it has a wealth effect, it has also been loved by many investors. When mainstream coins fluctuate sideways or during weekends, altcoins will rise to the sky, attracting a large number of speculators. Just like the OG when I wrote the article today, it pulled nearly 400% in one day, which undoubtedly does not make people feel a sense of emptiness and anxiety.
I generally look at the cottage is to choose a few high volume (VOL) and plate leaders to batch analysis, when the batch of copycat disk structure forms a resonance trend, then the direction of the market can get a basic confirmation.
In addition, altcoins also have a total market capitalization indicator (ticker Total3), which is also an important reference for me to analyze altcoins and market trends.
The above is the five-sided rule that I often use in the cryptocurrency market, and it takes a long time to figure out and combine trading strategies. If friends feel that they have benefited a lot, follow me and update the technical dry goods frequently.
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