Hello, I am trader Gege. In the continuation of the previous article, let's continue to talk about the essence of trading and several methods to deal with trend retracements. I hope it will be helpful to you and wish you a calm trading experience!
There are four methods to deal with retracements in a trend.
The first method is to not tolerate any retracement. As soon as there are signs of weakening in the trend, exit immediately and wait for the next trend to appear. Otherwise, do not enter the market at all. This method is essentially scalping. The advantage of this method is that the retracement is relatively small, and the mindset is relatively relaxed throughout the entire retracement process. The downside is that it may miss out on some profits.
The second method is to ignore any retracement. Even if the trend weakens, do not exit as long as the market has not proven that the trend has reversed. The advantage of this method is that the losses are minimal during the continuation of a true trend, even if there is a large retracement along the way, it can eventually be recovered. However, the downside is quite obvious. When a true reversal occurs, the retracement will be significant.
The third method is to reduce positions whenever the trend is preparing to retrace. Whether it is a retracement or a reversal, start reducing positions. If it is confirmed to be a retracement, then add back positions. If it is confirmed to be a reversal, then exit completely. The advantage of this method is that the losses during the entire trend are slightly smaller than the first method. If the trend truly reverses, the profit loss will also be slightly smaller than the second method.
The fourth method is to add to positions whenever a retracement occurs. Add positions with each retracement, and continue holding. This method is essentially an aggressive version of the second method, and its advantages and disadvantages are more pronounced. The advantage is that once a major trend is captured, the returns will be the most significant. The downside is that if a reversal occurs, the retracement will also be the largest.
Therefore, from a risk management perspective, I never recommend beginners to use the fourth method. It is the easiest way for traders to fall into emotional trading with a slight oversight. However, each of these four methods has its own advantages and disadvantages. Ultimately, there is no absolute best method or one that cannot be used. The key is to consider your own personality traits. As long as it suits you and feels most comfortable for you to use, then it can be used.
After all, everyone's psychological tolerance is different. The first method has the least psychological pressure, the third method is next, the second method requires traders to have a slightly greater psychological tolerance, and the fourth method tests the psychological pressure the most. But from my observation, the vast majority of traders actually only have the psychological tolerance to use the first method, but are constantly tempted by the returns of the second or fourth method, and then frequently switch methods during operations, leading to neither doing the first method well nor doing the other methods well, and then falling into frustration, self-blame, and swearing.
So, just based on this point, children are actually much luckier than these adults, because when children make mistakes, they have parents to supervise them and make corrections. But adults must take responsibility for their own actions and pay the price, and even correcting mistakes can only be self-monitored. And just this point alone has already stumped the vast majority of traders in this market.
In a normal market, the opposing sides are not institutions and retail investors, but smart people and fools. Many big traders believe that the difference between institutions and retail investors is the volume, but in fact, this is not the key point. The real difference between institutions and retail investors is their trading strategies. Large volume has its own strategies, and small volume has its own tactics. It is not that after the whales have feasted, the other fish will starve to death, which does not conform to the laws of nature at all.
After all traders enter the market, they all have one goal, which is to pursue the maximum profit. Use your own intelligence to make fools pay. It should be noted that when large institutional players buy a large amount of chips at low prices and sell a large amount of chips at high prices, they need an equal amount of counterparty volume to complete the transaction. The counterparty trading with them at this moment can be considered a fool in the eyes of the institution, so are these fools a group of retail investors? In fact, it is not necessarily so, it may be another big fool with the same volume as them.
Because in this market, the standard for distinguishing between smart people and fools is not volume, but behavior. Those who are influenced by price fluctuations in their operations are the fools, regardless of their volume. It is an irresponsible conclusion to judge retail investors as fools just because their volume is smaller than that of institutions.
Because in this market, there is never a shortage of stories of institutions channeling funds from retail investors to listed companies. The ones who can truly stand tall in this market are professional players, none of whom are amateurs. The comparison here is not about volume, but about rationality and greed, about human nature. Retail investors who play well can also become big players, and institutions that perform poorly can also be torn apart by claws from all directions.
The market is actually so cruel and ruthless. The final cake will be divided among the same group, which is a group of smart people. Always remember, any small mistake you make will eventually become an opportunity for others to exploit you. Therefore, we should think about the difference between smart people and fools, and also understand how to not let our behavior be affected by market fluctuations. After making a strategy, we should shield ourselves from external interference.
Returning to the market, although the weekly chart of Bitcoin shows a double pin bar, attention should also be paid to the resistance of the 7-day moving average. It remains to be seen if it can break through and stabilize above it. After two weeks of testing, the failure to break the 60,000 level indicates that the support is relatively strong, and the overall trend still maintains the previous view. On the daily chart, after completing the halving and forming a doji, the market rebounded, and is currently testing the 60-day moving average. The next thing to watch is whether it can stabilize. If it does, then it will test the resistance around 70,000 and even the high point. Therefore, the trend in the next few days is very important, so observe more.
The MACD fast and slow lines have already turned and converged. If it can smoothly form a crossover and break through the zero axis, the short-term bullish trend will see better gains. The important support below in the short term is around 65,000-64,500, and the most crucial level is still around 61,000-60,000, which has been mentioned in previous articles. The resistance above should first focus on the 68,000-69,000 level, followed by the 71,000-72,000 level. There will not be specific positions in recent articles, and more real-time advice will be provided internally. This article ends here today, and we will see you next time. For more real-time advice, find Gege.
Suggestions are for reference only. Enter the market with good risk management, and manage profit and stop-loss spaces on your own. Specific strategies should be consulted based on real-time market conditions.
By/Trader Gege, a friend willing to accompany you to rise again
Many individual investors are unable to enter the trading door simply because they lack a guide. The problems you ponder over can often be solved with a single piece of advice from an experienced person. Daily real-time market analysis of BTC, ETH, BCH, LTC, EOS, XRP, DOT and other currencies is publicly available in the circle of friends, and there is also guidance in the experience exchange group, with real-time market analysis and operation guidance available 18 hours a day. Welcome to scan and add for real-time guidance. Note! The contact information below is not mine!
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