Vocabulary
The actual knowledge of trading is partially captured in the terms and related concepts which the long-term professional market participants are using when talking (communicating) to each other.
Understanding of the captured notions and patterns behind the terms and memes is crucial.
Here comes an unordered list of the most often used (and misused) ones:
The principles
Before we try to extract the wisdom of the crowds, we have to understand the basic principles which underlay all the recurrent patterns and common notions.
Cascading
This is an actual manifestation of what the theoreticians call a feed-forward and feed-back loops.
Actions of some market participants cause or trigger the automatic actions or reactions of the others, so the whole movement gets reinforced and is actually cascading in terms of speed and volume.
- Short-covering by bears when the price reaches into (and beyond) certain regions
(their entry points) causes particularly long and fast-growing green dildos.
- Long-squeeze is when bulls close their losing positions upon the price action in the “opposite direction” (from their expectations). This cascade into sell-offs (massive red dildos).
In principle, when the price reaches the areas when stop-loses are being triggered, cascading happens, which, in turn, gives to naive degens the false “buy” or “sell” signals (which are too late – their positions will be stopped out by a pullback or a bounce caused by the smart actors, trading /against retail).
This is not just a merely sum of factors, but a short-term exponential effect. Once it is done, a slow opposite price action usually occurs, as a reaction to an unusual movement.
Stop hunting
Institutions (market makers and exchanges) usually trying to front-run more straightforward, predictable and regularly occured price actions.
The ones with big pockets and the knowledge of the open positions and open interest, could manipulate the market (via coordinate buying or selling) in the direction that will trigger the automatic stop-loses of retail.
This is possible because the vast majority of “stops” are set according to some well-known “advises” from the meme books (like “just below or above the tip of the wick”, etc).
The principle is that crypto markets are unregulated and therefore heavily and frequently manipulated by literally every single institution. Manipulations and dumping on retail are the most common and the only viable business plans.