June 24, 2021

Financial Technical Analysis Crypto Narrative Chapter 3 Candle Stick Patterns

candle stick chart
The candle stick chart was introduced by Steve Nison in his book, Japanese Candlestick Charting Techniques developed by Munehisa Homma, a rice merchant from Sakata, Japan who traded in the Ojima Rice market in Osaka during the Tokugawa Shogunate. It really looks like a candle where the wick is the high, the wax is the open/close, and the handle is the low. Today, candle stick chart is useful to efficiently see market behaviors and predict future movements.
bullish candle in line chart bullish candle
A bullish finished candle is usually colored green or hollow. It is a summary of a price movement that starts/opens with a lower price and ends/closes with a higher price. Thus, a bullish candle means that the price went upward in that certain period.
bearish candle in line chart bearish candle
On the other hand, a bearish finished candle opens with a higher price and closes with a lower price. Thus, a bearish candle means that the price went downward in that certain period. It is usually colored red or filled.

Simplest Pattern

Candle Body Length

Candle Body Length
A balanced bullish candle size is more to a bullish signal and vice versa for a balanced bearish candle is more to a bearish signal. There are even many articles for starting traders that we buy after there are series of bullish candle suggesting us to ride the wave and the same that we should sell after there are series of bearish candle. However, when the body is very big, it indicates a great difference between the open and close position either a strong buy or a strong sell. I do not recommend a hasty buy when there is a big bullish body candle especially near the resistance level. In the DOW Theory, while the balanced bullish candle is like the participation phase, the big body candle near the resistance level have more probability of an excessive phase where people FOMO (fear of missing out) which are the last people to enter the market. At this point is more logical to take profit. On the other hand, I have many experience to a very short term buy at a big bearish body candle but beware if holding longer because the price may continue the bearish trend rather reverse to a bullish trend.

Candle Shadow Length

Candle Shadow Length
As for the bottom and top sticks/shadows means the same whether bullish or bearish candle as it only shows the highest and lowest price on that certain period. If the top shadow is longer compared to the other body parts means that the sell pressure is strong. When the price reached the top, the sellers slams the price down. If the bottom shadow is longer compared to the other body parts means that the buy pressure is strong. When the price reached the bottom, the buyers lifts the price up.

Simple Patterns

Hammer

Hammer
A candle that looks like a hammer found near the support line. A hammer have a high probability of a bullish reversal because of the long lower shadow showing that after sellers tried to break the price down, buyers supported the price from falling driving the price back up. The probability of a bullish reversal increases if it is a bullish hammer where the price closes higher than the opening price. In my experience, a bearish hammer where the price closes lower than the opening price still have a probability of a bullish reversal because of the long lower shadow alone but not as much probability as a bullish hammer. Thus, I recommend to wait longer for more confirmations if it is a bearish hammer.

Inverted Hammer

Inverted Hammer
A candle that looks like an inverted hammer found near the support line. Like hammer, a bullish inverted hammer have a high probability of a bullish reversal. Although shows a long upper shadow but the price closes higher than the opening price indicating. Although the sellers are strong, but they are not strong enough to turn the candle bearish which may means that the sellers are running out of selling power. Unlike bearish hammer which I experienced still have a probability of bullish reversal, a bearish inverted hammer is less likely to be a bullish reversal because it loss the point why inverted hammer is bullish reversal which is sellers are not strong enough to turn the candle to bearish where in this case the sellers are strong enough to turn the candle bearish.

Hanging Man

Hanging Man
While a hammer is found near the support line, a candle that looks like a hammer that is found near the resistance line is called a hanging man which really looks like a man hanging at the roof. A bearish hanging man candle have a high probability of a bearish reversal because the buy pressure from the long lower shadow is not strong enough to turn the candle bullish and even more so to break the resistance line. On the other hand, it is uncertain if the hanging man is a bullish candle because the buy pressure defeats the strong sell pressure that causes the long lower shadow and turned the candle bullish. There is a chance that the buyers break the resistance line but often it is uncertain to take a position and best to wait and confirm other information.

Shooting Star

Shooting Star
An inverted hammer found near the resistance line is called a shooting star. A bearish shooting star candle is a strong sign of bearish reversal because the sellers defeats the buy pressure that tried to break the resistance and turned the candle bearish. On the other, in my experience, the bullish shooting star is more uncertain than a bullish hanging man because it was met with a strong sell pressure but the buy pressure persisted and turned the candle bullish which is a more reason to wait and confirm.

Marubozu

Marubozu
Marubozu, まるぼうず, 丸坊主, can be translated as close-cropped head or bald hill. Ideally, the candle does not have either lower nor upper shadow. A bullish Marubozu opens at the lowest price and closes at the highest price meaning that buyers does not give sellers the chance to push the price down and vice versa a bearish Marubozu opens at the highest price and closes at the lowest price meaning that sellers does not give the chance to push the price up. Predicting the future price action with Morubazu commonly depends on the price and the position of the candle. A small to medium size bullish Marubozu near the support line have higher probability of bullish reversal while a large size bullish Marubozu near the resistance line may indicate a FOMO and profit taking is at the horizon. Similarly applies to bearish Marubozu that a small to medium size bearish Marubozu near the reistance line have higher probability of bearish reversal while a large size bearish Marubozu near the support line may indicate over sold and may attract buyers because the price looks cheap. On the other hand, when breaking the support or resistance line may indicate a new phase but check the news first to confirm. Lastly, while ideally Marubozu does not have lower nor upper shadow, candles with very small shadows may behave as a Morubozu as it does not have to be perfect.

Doji

Doji
Doji, どうじ, 同事, can be translated as same matter. Any candle when the price closes at the same value as the opening is a Doji. It shows that buyer and seller have similar strength. While previous candles shows higher probability of continuation or reversal, Doji is a moment of pause not to make an entry but to call our attention that we should watch whether the trend will continue or reverse. A regular Doji have an equal lower and upper shadow, a long legged Doji have longer lower and upper shadow which shows high volume, a doji with only lower shadow is a dragon fly where the selling pressure is cancelled by the buyers, and vice versa a doji with only upper shadows is a gravestone doji where the buying pressure is cancelled by the sellers.

Spinning Top and Spinning Bottom

Spinning Top and Spinning Bottom
Spinning top candle stick literrally should looks like a spinning top toy. In most references, a spinning top have an almost equal upper shadow and lower shadow and a body equal or less than the shadow. Like Doji shows some level indecisiveness in the market but unlike Doji the candle can be bullish or bearish. A bearish spinning top near the resistance line have better probability of reversal than a Doji. A spinning top near the support line can be called a spinning bottom which have better probability of reversal than a Doji.

Popular Complex Patterns

Tweezer

Tweezer
While any previous candle stick doubles increase the probability of a reversal or continuation such as a double spinning top, double doji, double hammer, double inverse hammer, double hang man, and double shooting star, a tweezer candle stick is even more so. A tweezer literally is a tool with to clipping points to pick up small objects. Thus, a tweezer in candle stick chart pattern is a combination of two candle sticks which have the same either bottom or top height. They are significant near the support level which is called a tweezer bottom and near the resistance level which is called a tweezer top. Although we still should confirm with the news and other indicators, a double candle stick especially a tweezer is strong enough to make traders set a position straight away with stop loss just right above or below the height, especially when the second candle is bullish in the support level and bearish in the resistance level.

3 White Soldiers and 3 Black Crows

3 White Soldiers and 3 Black Crows
The three white soldiers are 3 bullish candle stick. Ideally, they have long bodies and short shadows indicating consistent buying pressure with less selling pressure shown by the short upper shadow. This shows a probability for an up trend to continue and even more so if there are Marubozu candles involve. When they are found near the support line may indicate a reversal bullish trend. The opposite of 3 white soldires are 3 black crows.

Harami

Harami
Harami, 孕み, はらみ, means pregnant in Japanese where in a candle stick pattern we have to find two candle sticks combined together looks like a pregnant woman. The first candle must have a long body and the second candle must have a short body which must reside between the opening and closing of the first candle. Although we can find ideal Harami in commodities, foreign exchanges, and stocks, it is extremely rare to find an ideal Harami in cryptocurrencies. While commodities, foreign exchanges, and stocks only opens on working hours (9-5) sometimes with breaks and working days (Monday - Friday) where in short 8/5, cryptocurrencies are never close 24 hours 7 days (24/7) with no breaks and therefore the opening price of the second candle is almost always the same price as the closing of the first candle. A harami can be a potential moment of reversal because the two candles combine shows a resistance in buy or sell pressure. When a harami happens, we should give our attention.

Engulfing

Engulfing
The candle positions in engulfing is the opposite of Harami. The first candle is narrow while the second candle is wide engulfing the first candle. An ideal bullish engulfing is that the second candle opens at a lower position than the close of the first candle but closes at a higher position than the first candle. If bullish engulfing is found near the support line, it can potentially be a reversal because the line chart seems to be forming a bottom well or downward spike. Vice versa for bearish engulfing near the resistance level as it can be seen to potentially form another mountain. Due to the nature of 24/7 in crypto, it is theoretically impossible to find ideal engulfing because the open position will always be the same as the close position of the previous candle.

Judas

Judas
A candle pattern based on Judas Iscariot the disciple that betrayed Jesus as bullish Judas pattern betrays the previous bearish candle and reverses from the lows to set up a bullish reversal and vice versa for the bearish Judas. Simply, a bullish Judas is a long bearish candle followed by a bullish hammer near the support line and a bearish Judas is a long bullish candle followed by a bearish shooting star near the resistance line. Traders may try to put a position and a stop loss at the end shadow.

Stars

Stars
Any candle that is alone at the top or at the bottom are called stars. Some also called them abandon babies. Like how the stars are separated by the skies, abandon babies are separated by gaps. However, gaps cannot be found in crypto due to 24/7 but we can identify similar to stars as a peak candle that have shorter body than the left and right candles. A long bullish candle followed by a star and finally followed by a long bearish candle is called an evening star because bullish candle represents the day and the bearish candle represents the night, thus the star is in the evening. A morning star have a bearish candle on the left which previously was the night, the star is in the morning, and the bullish canlde on the right is the upcoming noon.

3 Inside and 3 Outside

3 Inside and 3 Outside
While previous candle patterns are more to signals, 3 insides and 3 outsides candle patterns are closer to entry points. 3 inside up is when the third candle after a bullish Harami closes higher than the first candle confirming a bullish trend. 3 inside down is when the third candle after a bearish Harami closes lower than the first candle confirming a bearish trend. For 3 outsides, replace the Harami with Engulfing and see whether the third candle breaks the second candle. While it is true that many traders uses this candle pattern for confirmation but do not forget that this is only one out of many confirmations. The direction can go the opposite way and therefore to stop loss at the opposite side of the candle.

3 Line Strike

3 Line Strike
3 Line Strike consists of 3 white soldiers engulfed in a bearish candle for bearish pattern and 3 black crows engulfed in a bullish candle for bullish pattern. Ideally, the second candle should be shorter than the first candle, and the third candle should be shorter than the second candle (candle 1 > candle 2 > candle 3). The fourth candle should be equal or larger than the three candles combined (candle 4 = candle 1 + candle 2 + candle 3).

3 Method Formation

3 Method Formation
3 Method Formation is like a 3 Line Strike but with an extra previous candle where the first candle ideally equal to the last candle (candle 1 = candle 4). Like 3 Inside and 3 Outside candle pattern, 3 Method Formation is more of a confirmation candle pattern where the last candle breaks the mother candle or 1st candle. Things can go wrong so stop loss at the opposite price of the mother candle.

Wait

Trading View BCH
What does this have to do with crypto? Unlike the previous chapters where I relate crypto such as when we can dollar cost average (DCA) optimally, this candle stick pattern chapter is general trading tutorial. However, all the candles above are found in cryptocurrency charts mostly Bitcoin Cash (BCH) and some UNI, SUSHI, MATIC, etc in Trading View, which means that even candle patterns can be used in crypto trading. Do not forget to go back to the basic theory again like identifying the current trend first, whether the candle is in the supply or demand area, and check the news before making a trade decision based on the candle in my previous chapter. Go even further back to the DOW Theory to see the bigger picture first. The candle stick is just one part that needs to be confirmed with others from the wide trading perspective.

Mirrors

June 15, 2021

Financial Technical Analysis Crypto Narrative Chapter 2 Basic Drawings

swing trend support resistance supply demand
The previous chapter discussed about the DOW Theory where every financial technical analyzers have to remember when performing any analysis. This chapter discusses the basics of drawing lines on a chart. In many channels and social media we less often see traders not drawing lines but straight away using indicators and drawing chart patterns. The possibility is only two, either that they are already very experienced that they no longer need to draw basic lines where they imagine them in their minds like playing blind chess or they are neglecting the basics. If we often in loss by using chart patterns and indicators, probably our basics are not solid yet or worse we forget about the DOW theory. Therefore, it is recommended to build a solid foundation first on the basic where the basics or drawing lines are drawing swings, trends, supports & resistances, and supplies & demands.
tabtrader smartphone
To start drawing, foreign exchanges, commodities, most stocks, and popular cryptocurrencies are available in Trading View for free. If you are into decentralized finance (DeFi) where most coins are not available in trading view, you can try Dex Tools for Ethereum ecosystem, and Dex Guru for Binance Smart Chain ecosystem. In smartphones, I use Tab Trader. Other than that, you can always install Metatrader but Leave a comment if you know more. For beginners, I suggest starting with bar charts before going to candle charts.

Swing

code no swing
A swing literally is a swing. A Seat riding up and down is swing chair, mood going up and down is mood swing, and price going up and down is price swing. Thus in this chart is drawing the up down movements of a price action. While it is easy to show traders how to draw swings face to face but describing is a little difficult. The figure above should have been shown later but to describe swings with words must be done the opposite which is to be shown first. Thus to start drawing a swing from left to right is to determine a time frame, then a period like every 10 bars or 10 candles where we are free to choose, and finally find the lowest or highest price within that period. If the first chosen price is the lowest, then find the next highest price, and vice versa if the chosen price is the highest then find the next lowest price.
wide swing
Connect the labels with lines from left to right. The result a simpler view of the movement of the price, and the bottoms and the tops which will be used to make further drawings. During my financial technical analysis course, I was always taught when my drawings are wrong is because probably I did not draw the swings nicely. I searched Google, Investopedia, and Wikipedia, I could not find this theory. So this knowledge is obtained directly from my course.
narrow swing
Wait, can't we draw a narrower swing? Sure we can. Back to the DOW Theory that there is no absolutely right nor wrong but there are most likely and less likely. We experiment with ourselves to see whether narrower or wider swings can make us analyze better or not. Although making wider swings compared to the previous wide swing figure are more prone to miscalculations than making narrower swings. I suggest making a swing on a longer time frame first such as above 4 hours timeline but make it shorter if there are no significant swings to be found.

Trend

simple trend
The DOW Theory stated that there are three trends which are bullish, bearish, and sideways, although sideways are rarely drawn. Again, it is easy to show how to draw a trend face to face but to describe it with words, we must first change the labels after the first twos to either lower lows, lower highs, higher lows, or higher highs. When there are more higher lows and higher highs then the trend seems bullish and the opposite if there are more lower lows and lower highs then the trend seems bearish. In a bullish trend, the upward movement is usually longer then the downward movement and vice versa in a bearish trend where the downward movement is usually longer then the upward movement. The longer movement is called impulsive, and the shorter movement is called corrective.
adjustment trend
Wait, can't we just draw the trend like this? Sure we can. To draw a trend, connect the low with a higher low where the next periods have a higher high for a bullish trend or connect the high with a lower high where the next periods have a lower low for bearish trend. Trend often breaks and when the price failed to return to the trend, then the trend officially broke where we have to draw an adjustment trend.

Cryptocurrency believers and supporters often Dollar Cost Average (DCA) or buy small amounts every certain periods like an installment. It is a good idea to do this whenever the price touches the trend line. Not only it is much better than buying at the top but buying whenever the price touches the trend line helps maintains the bullish trend which should be inline with the goal of believers and supporters. If a clear trend break occurs, it is better to wait and DCA in the next lower bullish trend line.

Support and Resistance

Support and Resistance
Support is literally support to keep the price from falling where in the chart it is seen as a price bounce like the bottom of a well. Resistance is also literally resistance to keep the price from flying where in the chart it is seen as a price rejection like the top of a mountain. It is simply most likely a buy signal when the price nears the support line and a sell signal when the price nears the resistance line.

The first support line to draw is the lowest price action in the current visible chart and vice versa for the first resistance line which is the highest price action. For me, I like to draw another support line at the second lowest sharp downward spike and vice versa for another resistance line the second highest mountain. Last is to draw significant support and resistance lines. The more often the price bounces the more significant the support line and the more often the price rejects the more significant the resistance line.

For cryptocurrency believers and supporters, the next line to DCA is the support line when the trend breaks. For traders is a chance to buy big because the price oftens bounce big for a short time which is a chance to win short term profit. If going big, make sure to stop loss when the price breaks down the support line because there will be high probability that the price will continue to drop. For beginners, the resistance line is not a good place to hurry and buy. It is best to analyze first whether it can break the resistance line or not. If not, wait for some bullish news and breaks to be safe.

Supply and Demand

simple supply and demand
While supports and resistances are horizontal lines, supplies and demands are horizontal area. Buying at the support line and selling at the resistance line is a great deal but how long must we wait until the price touches the support or resistance line? Even when we reached a point that the price touches the support and resistance line, we may just miss it due to busy with life. Often, the price does not touch the lines at all but bounced somewhere near it. Therefore, drawing supplies and demands area are helpful.
simple supply and demand drag
The basic way to find a supply area is to draw a rectangle between the peak of the highest mountain and the peak of the second highest mountain. The vice versa for the demand area which is to draw a rectangle between the bottom of the lowest well and the bottom of the second lowest well. After dragging the rectangles to the right a bit, drag them far to the left where the more price action the rectangle touches, the more significant they are.
wide supply and demand
Can't we enlarge the triangle not only highlighting up to second highest mountain or second lowest well but up to the third one? That is fine as well where suite ourselves which one gives us more accurate analysis. A supply is an area of frequent selling and demand is an area of frequent buying. As long the rectangles meets this criteria, it is still correct. When the price is in the supply area, we should be aware of rejections or aware of breaking the roof. When the price is in the demand area, we should be aware of bounces or aware of breaking the ground.
rally drop base
Another type of supply and demand area is an area where the price action often stays. In the DOW Theory of 3 phases, it is either an accumulation area or distribution area. In terms of signals in electromagnetic wave looks like a noise. There are four occurrence of a supply and demand area. The first one occurs after a significant increase in price then ended with another significant increase in price (rally-base-rally). The second one occurs after a significant increase in price then ended with a significant decrease in price (rally-base-drop). The third one occurs after a significant decrease in price then ended with another significant decrease in price (drop-base-drop). The fourth one occurs after a significant decrease in price then ended with a significant increase in price (drop-base-rally). I find it easier to use line chart to find this kind of supply and demand area.
rally drop base drag
As always, drag the rectangles to the right and to the left to see which ones are significant. Based on my experience, both support and resistance line and supply and demand area deserves my attention as either a reversal or a breakthrough may come soon. The difference is while support and resistance area requires my immediate attention, supply and demand area only requires my caution. Finally, the supply and demand area is useful to predict which area a price action will visit after breaking a support or resistance line. Crypto believers and supporters should refrain from DCA after a price clearly breaks a support line until it reaches the next supply and demand area below.

Reminder

After learning swings, trends, support & resistance, and supply & demand, most of us are probably eager to try trading straight away but do not forget that if we trade based on this alone, we are only using technical analysis which there more factors to consider. One of the DOW Theory tells us to always confirm the market where when we finish drawing technical analysis, do not forget to confirm with the news etc. Also, another DOW Theory to not forget to look at the bigger picture first. Once again, this method can be applied anywhere such as commodities, stocks, and foreign exchanges. For crypto supporters, why do we need need this method if we can just buy at every dip or dollar cost average (DCA) every month? This method can improve our buying timing where we can accumulate more crypto than just randomly buying.

Mirrors

June 8, 2021

Financial Technical Analysis Crypto Narrative Chapter 1 DOW Theory

Crypto DOW Theory

In the current financial technical analysis (FTA), the first subject to learn is the DOW Theory. Sounds similar to DOW Jones right? Well it was written by Charles H. Dow who was the co-founder of Dow Jones and Company. The writer himself never called it the "DOW Theory" as he was just writing pieces of information in The Wall Street Journal where he was the founder in. William Peter Hamilton, Robert Rhea, and E. George Schaefer collected and organized his writings from 255 editorials in The Wall Street Journal and called it the DOW Theory.

If you have been following my blogging income reports, you probably read that I used my profits from the crypto bull market to take a course in financial technical analysis. Since there are already many sources about the Dow Theory such as Wikipedia and Investopedia, I will write mine from a different perspective which are based on my experiences in the cryptocurrency market and my financial technical analysis course. There are six main headlines of the DOW Theory:

1. The Market Discounts Everything

The market incorporates every single piece of information in real-time. It is almost humanely impossible to catch up in real-time. So there are "no absolutely right" and "no absolutely wrong", but there are "most likely" and "less likely".

  1. The market discounts everything.
  2. The market went the opposite of our analysis.
  3. There are probably information that we left out so go back to rule number that the market discounts everything and readjust our analysis.

To relate this to crypto it is always best to quickly change our tune. An investor does not follow Bitcoin Maximalist who are always bullish in Bitcoin. Always bullish is good for early investors but for new investors, it is stupid to buy at a high price. It is safer to wait for a pull back, correction, or the bear market rather than buying high and panic selling later. Investors must realize that they are not purely investors, they are supporters who will live and die for Bitcoin. For analyzers, the market is the king, not Bitcoin. If you want to take a god, do not take Bitcoin as a god, but take the market as the god. On the other side, always bearish like Peter Schiff and listening to central bankers always saying that crypto have no value and pure speculations is not good either. I do believe that the crypto market is highly speculative as most people went in only to hope for profit in the future. However, only "highly" and I believe there are values such cheaper cross border transaction, transparent ledger, cannot be confiscated, cannot be censored, decentralized finance, and all other innovations in financial technology (fintech). When Bitcoin reached $1000, Peter Schiff was right to call it a bubble, but when it dropped, it was not wise to stay bearish. The fact that it went up to $20000, he was right again to call it a top and dropped to $3000 but do you stay bearish again? Wrong! the next top is $60000! Following Peter Schiff is good for preserving your wealth by converting your assets to gold and silver but for average people will never break through the rich boundaries if you just follow him. If you ignored him and went in to crypto early, you have been rich. Even I earned 10 years worth of average salaries in just half a year. If you are a trader and always listens to Bitcoin Maxis or Peter Schiff, you should stop calling yourself a trader.

2. The Chart Have 3 Main Scales

Micro Scale

BTC Micro Chart
Take a look at 12 March 2020 which seemed like Bitcoin is going to die.

Macro Scale

BTC Macro Chart
If we zoom out, it is just a cycle and nothing dramatic.

Full Scale

BTC Full Chart
The great price crash in March 2020 due to COVID Pandemic seems insignificant in the grand schemes of things.

Order of Analysis

I wrote the narrative the opposite of how we supposed to analyze in order to emphasize the importance of looking at the bigger picture. Not looking at the bigger picture is also the cause of people getting destroyed by fear of missing out (FOMO). When looking at the bigger picture, people should be cautious when Bitcoin pumps, but instead did not take profit and let greed took over them, resulted in them panic selling when the price crashed. Ofcourse, they will cry more when the price recovers. Although the best time to trade is during the FOMO but the best time to invest is during the calm before the storm and by zooming out to the bigger picture, we can better guess when it is a calm and when it is a storm.

Looking at the bigger picture applies every where not just in finance. When we want to read a book, we first look at the cover, the title, then its summary before reading the contents. In an article, we read the headings first, then the images, then finally the contents. In education, we learn the overview in primary school and highschool, then choose a field in undergraduate school, and finally specialized in graduate school. We ourselves are living in a world, in a planet called Earth, Earth have many countries, countries have many provinces, and provinces have many cities. There are numerous examples and the order for financial technical analysis is:

  1. Look at the full scale usually above weekly charts.
  2. Zoom to the macro scale usually daily charts.
  3. Finally zoom to the micro scale which are hourly and minute chart.

3. Each Scale have 3 Trends and 2 Trends have 3 Phases

The 3 Trends

BTC Bullish Sideways Bearish
  • Bullish means a bull charging up where the price is going to an upper direction.
  • Bearish means a bear slamming down where the price is going to a lower direction.
  • Sideways means the overall price is not going up nor down.

The 3 Phases in 2 Trends

BTC 3 Phases

Bullish Trend

  • Accumulation is a sideway phase before going up where early investors are buying and accumulating in this phase. This is boring times in the market where less people are interested and as I said before, investors invests during the calm before the storm.
  • Participation means more people are starting to hear about the asset and are interested in participating. In 2021, when Elon Musk and other influencer started to tweet about cryptocurrency, their followers became curious, and then became interested in buying. For traders, this is the phase to become active as price starts to fluctuates.
  • Excessive is a phase more related to fear of missing out (FOMO). Relatives and friends starting to hear that people are getting rich with cryptocurrency and they do not want to be left out. Most decided to buy and gamble without doing their own research. Finally when distant relatives and friends who never contacted you before contacted you asking about cryptocurrency is a strong indication that it is the end of the excessive phase. This is especially true if finally your grandparents asked you about crypto as well.

Bearish Trend

  • Distribution phase is where finally many news broadcast about cryptocurrency because the price greatly rose. Everybody is in the game. Who else is left to buy to drive the price up further?
  • Panic Selling is a phase where there is no longer new buyers driving the price up and buyers especially early ones started to take profit driving the price down. New buyers and investors suddenly at loss or almost at loss. They began to panic as the price keeps going down afraid of losing their investment and started selling. The price kept falling down and more of them started to panic.
  • Despair is a phase where there is finally no more panic sellers. The ones left are either true supporters of the asset, users or more to utilizers of the assets who bought not to invest but to use, or those who are late in panic selling and are in despair as selling at this point will not make much difference. Though the future can change the classification of this phase. If the price drops again, this phase will change name into distribution phase, and on the other hand if the price rises, this phase becomes accumulation phase for new buyers.

4. Volume Confirms The Trend

Volume Trend
A higher volume suggests that a trend is most likely to continue. On the other hand when the price moves when there is small volume, the theory suggests that we should be careful of reversals. Although, mnay traders I knew prefers to use indicators such as relative strength index (RSI), stochastic, and moving average convergence divergence (MACD) as a replacement of volume indicator. Maybe in the past there were no modern indicators and traders relies on volume.

5. Market Confirms Each Other

Cryptowatch Correlation

Here I am using Crypto Watch to see correlations between crypto assets. It is popular today when Bitcoin is up, the whole crypto market is up, and so does the reverse. Although, I find it safer to use the top coins as an indicator or better of the majority of the market if possible. If the top coins goes down, there is a high possibility that other coins will follow. If you are eyeing on a coin, it is better to wait until it goes down as well before buying. On the other hand, if the coin you are eyeing does not go down, it tends to go up instead where bases on my experience, something special is happening with the coin.

In my opinion, one the reason why the whole crypto market is correlated to Bitcoin when the price rises is because there are still many people who are not into crypto. For new people, Bitcoin is the first thing they learn. It is very rare for someone new to know about random coin first before Bitcoin. After they are into Bitcoin, then they will see that there are other cryptocurrencies. In short, Bitcoin is currently the corner stone for new people. They buy Bitcoin first, then they buy other coins which is why when Bitcoin rises, other coins tends to rise.

As for when Bitcoin price is down, is related with everyone trying to buy top coins with cheaper price. When Bitcoin is down, traders tends to take profit on other coins and wait and see how far Bitcoin price can go down before buying. In short, most people in crypto are interested in many coins, not just one which is why when top coins goes down, people in other coins will sell as well because they see an opportunity get in more into top coins.

As for token ecosystem they are the same. For UNI, LINK, and SUSHI, if Ethereum goes up, then these coins tends to go up because in order to buy those tokens we need Ethereum. For CAKE, BAKE, BANANA, etc we need BNB to buy them. For PNG, YTS, and SNOW we need AVAX.

DOGE coin is becoming less correlated with the crypto market because it moves based on influencers such as the TikTok movement to make DOGE $1 and Elon Musk, Snoop Dog, Gene Simons, and Dallas Mavericks adopting DOGE. Gold and Silver is becoming less correlated both to the US Dollar and the crypto market which is a good diversification option. Finally, there is no such thing as buying crypto and US Dollar at the same time as they are negatively correlated.

Other than correlating one indice with another and one asset with another, is to correlate information in our analysis. When our technical analysis shown to be bullish and a buy signal, we should confirm with the fundamentals whether the project delivers good product or not, the road map whether they deliver on time or not, the news whether it is interesting or not, and the sentiment whether people are happy or angry. If most of them are positive, then is a strong convergence correlation that it is mostly safe to buy. However, if they are negative which is in divergence, there is a chance of reversal so be careful where it is best to do nothing if we are not sure. For example, the news is bullish but the price does not move. Investors will get disappointed and will sell.

6. Trend Persist Until Clear Reversal

Trend Until Clear Reversal
There are many noises in the short time frame. There are many ups and downs in the middle time frame. However, there is always a trend line in the long time frame. For as long as the trend line is not broken, the trend persists. For people who entered Bitcoin in February 2021, the bullish trend was broken in April 2021 as it failed to maintain $60000. For people who entered Bitcoin in New Years Eve 2021, the bullish trend was broken in May 2021 as it failed to maintain $55000. For people who entered during the DeFi hype in October 2020 are now in a critical moment whether the price can maintain $37000. For people who entered earlier are still in a bullish trend until it breaks below $20000. This can be why chain analysis showed that the people who panic sold are the newcomers because from their perspective the trend is bearish. However, for early people like me, chain analysis showed that most of us have not sold as we are still in profit and for us is still bullish.

Recommendation

The DOW Theory is helpful everywhere, not just stocks, cryptos, and foreign exchanges. It is helpful even in commodities, business, and for merchants. New traders probably did not know there is the DOW Theory and went straight to identifying supports and resistances, and drawing trend lines. A serious financial technical analyzer memorizes the DOW Theory, understands the meaning behind, and always be mindful of the Theory in every analysis. In other words, DOW Theory is first before doing any kind of drawings. For example, look at the bigger picture first and guess the phase that we are in. Second, check whether the trend is persisting or not and see whether the volume confirms so. Third, do not forget to look at the news, check people's sentiments, and see other correlated information as well. For example, we do not want to be buy/long on gold and Bitcoin when the United States Dollar is recovering. Instead, it is better to long on US stocks. Even before that, the fundamentals is more important where at least we should know what we are investing or trading in. You can try asking new traders about what Ethereum, Binance Smart Chain, and Polygon is. Probably most of them cannot answer. If they can, the answer is most likely that MATIC greatly rose and they made profit buying MATIC. If you are that kind of people, that is find, it takes time to read the fundamentals and you may most likely miss the trading if you read the fundamentals first. However, do not be like that forever because it increases the chance of you getting wreak. When you are asked what MATIC is, at least you should answer that it is a second layer of Ethereum providing much cheaper fees for decentralized finance (DeFi). That is a much better answer even it is not too accurate. Finally, when the market goes the opposite of your prediction, do not blame the market because DOW Theory number 1 that the market discounts everything and probably you missed some information. It is your analysis that is wrong, not the market. Discounts "everything" is literally "everything", even Elon Musk's Tweet.

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June 4, 2021

My Blogger Income May 2021 End of The Previous Bull Market but More Newcomers

Content Creation

Blogs

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  • LBRY: LBC 0 ≈ $0

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Personal Monetization

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Browsing

Cointiply

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Currently the quantity is too much to handle when the value I earned is not much. So I may report this on a separate article.

May 2021 Income ≈ $45

Grade: D

Personal Comments

Thanks to Elon Musk, China, and many other factors, May was the next big market crash of crypto. I lost 1/3 of my profits which was 10 years worth of average salaries here. I gave and donated another 1/3 before the market crash to people important to me. I am now left with 10 years worth of average salaries. I did sense that the market was going to crash but I missed it anyway because the fundamentals are in divergence. The fundamentals are still upcoming for innovations such as ETH 2.0, Binance NFT market place, Polygon (MATIC) as alternative to current expensive Ethereum, Polkadot cross chain, synchronization between Harmony One's main net to its smart chain where no need to cross chain like BEP2 BNB to BEP20 BSC and AVAX main net to its C Chain, etc. Therefore, I used some of my profits to take a private course on financial technical analysis.

However, the reason why I completely did not blog for an entire month was because many friends contacted me since my parents exposed my big profits during the bull market wanting to start trading crypto as well. As I wrote, I gave my parents some of the 1/3 of my profit and became curious about trading and used them to trade instead. I spent most of my days receiving guests helping them opening accounts at local cryptocurrency exchanges, deposit, and start trading. Ofcourse I knew that most of them do not care about crypto but only the getting rich quick. After teaching them the technicalities, I immediately told each of the groups to make chat groups where trading together is more fun and less stressful while avoiding myself temporarily being a signal provider. Each of them shared in their groups what they wanted to buy and what they wanted to sell. If profit then we celebrate together, if loss then we mourn together. They wanted me in the group to provide signals for day trading but unfortunately they overestimated me. I am a gem hunter, not a trader, not even an investor is accurate. To follow me gem hunting is currently too difficult for them. Therefore, I remained my role as an educator and gave descriptions about different coins daily for example Bitcoin is ..., Ethereum is ..., Litecoin is ..., USDT is ..., in order for them to at least know what they are investing in. This is also one of my reasons to take a course in financial technical analysis so that I can give signals to them too. Still, they are happy because during this COVID-19 Pandemic that they have the opportunity to earn at home rather than being pessimistic doing something unproductive everyday.

I actually planned to become an educator for users but it came earlier than I expected as my original plan was to complete my materials first while blogging. However, it is this enthusiast that made me forget Andreas Antonopoulos words that went our distant friends and families suddenly contacted us asking about crypto is went we should sell everything because that is a strong indication that the market is in excessive greed. Well, I missed selling and I am still hodling until now but my goal remained the same which is to introduce crypto to more people. Think about it, all my peers in college, I can count using my fingers who actually know about crypto. What happen if almost everybody know about crypto and it becomes main stream, how far can our portfolio rise? Still few people know about crypto, so if we missed the panic selling, is better to hodl because we are still early. Only if you entered the crypto market when it is already main stream is when you should be worried.

Appendix

Publish0x Earnings
Publish0x Earnings
Publish0x Contest
Publish0x Competition Earnings
Blurt Earnings
Blurt Earnings
Hive Earnings
Hive Earnings
Steemit Earnings
Steemit Earnings
Leo Finance Earnings
Aeneas, Leo Finance, and STEM Geeks Earnings
LBRY Earnings
LBRY Earnings
Coinimp Earnings
Coinimp Earnings
Bittube Airtime Earnings
Bittube Airtime Earnings
Brave Browser Rewards
Brave Browser Rewards
Netbox Browser Rewards
Netbox Browser Rewards
Presearch Rewards
Presearch Rewards

Donation

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