Newbie Guide to Trading (1) How is the price formed? What kind of trader are you?

What determines the price

What determines the price? The only determining factor for the price is money. Those who manipulate the price are actually the ones who manipulate money. Who are the people that decide the price?

In the long term, it is determined by fundamentals, and some major players will also become part of the fundamentals, such as Grayscale and MicroStrategy. Those who have experienced the last bull market should be very familiar with these two names. In the medium term, the price is determined by this. The combined forces of various technical schools, including those that look at data aspects and those that look at technical indicators. They usually follow a fixed trading mindset and are particularly concerned with a specific position.

In the short term, we also don't know whether the price will rise or fall. Looking at today, it might rain today, which could lead to fewer people going to work on Wall Street in the morning, and that might cause the price to drop; it is difficult to predict in the short term.

Fundamental Traders

The first type is fundamental traders, such as institutions and large active funds. There’s also Trump; when he says it’s going to rise, it might not necessarily rise, but if he announces certain policies that are favorable for price increases, like the recent stablecoin legislation or the Genius Act, then he has the ability to push prices up. We collectively refer to all of this as fundamentals.

Technical Traders

The second type is technical traders, which includes traders under an institution, quantitative traders from hedge funds, and those retail investors who have been consistently profitable for a long time. We are all looking at the technical aspects, and there is also a portion of people that we typically refer to as retail investors.

Impulsive Trader

They are impulsive traders. They may not necessarily have all three characteristics, but they definitely have at least one of them. The first type is retail investors who do not understand technical indicators. The second type understands technical indicators but chooses to trust their intuition. Even when the indicators clearly suggest a bearish outlook, they decide to go against it, believing that their fate is in their own hands rather than determined by external factors. Generally, they end up making the same mistakes as before. The third type has learned many indicators but always chooses to believe the one that aligns with their intuition. This type of person is quite classic; they may feel they have worked hard, having learned dozens of indicators and feeling knowledgeable. When you talk to them, they might seem like a genius to you because they can answer everything. However, once they open a position, for example, if they are bullish, but ten indicators tell them they are already bearish. As long as there is one indicator that suggests a bullish stance, they will trust that indicator. Each time they trust a different indicator, we collectively refer to these individuals as impulsive traders. They do not have a stable trading strategy.

Their trading features

Fundamental traders typically plan their trades on a monthly basis. They may anticipate developments in international and domestic situations. For example, before making a call, they might first campaign for a U.S. president, which makes such fundamental traders quite impressive, right? They have substantial capital, and they almost never buy at trial prices. Their interest rates and distributions are calculated on a weekly basis, and generally, they excel at using various trading tools, such as spot, futures, and options. Whether you have heard of them or not, they might even leverage their authority to arrange for their own sales through a Bitcoin ETF.

They generally have the ability to manipulate short-term prices through the media. Most of the media content that retail investors see is actually designed to make us believe that prices are about to rise. For example, every time BlackRock funds make a sale, they go crazy with press releases, saying that Bitcoin is expected to rise to 300,000 this year and ultimately reach 1,000,000. At this point, they are typically unloading their positions. When they want to buy, they will disseminate information that is classically known, such as "MicroStrategy is about to face liquidation," which may lead to a forced sale of a large amount of spot assets, potentially causing the price of Bitcoin to drop to 20,000. At this time, they are buying, and they can manipulate short-term prices through media control.

Basically, fundamental traders try to hide their trading traces as much as possible, only having to show their overall earnings during the annual report. For instance, what about BlackRock that was just mentioned? You listen to what they are shouting, like gold is going to drop to 2000? Or they say the market is going to reach 5000, and you feel like according to their purchases, they must be losing money badly. But if you look at their annual report, they are still making money every year. The positions they disclose are not necessarily the same as their actual trades; some are similar, but many times they are different. These people rarely use chips to maintain key prices, and even after they break support, they will continue to buy, buy, buy.

Some of the most classic breakout reversal patterns are bought by these people. Clearly, there is a support level inside, but it breaks down and is then bought back. Generally, these people use their money to push it back up; they have a characteristic of being able to endure significant losses. A single trade can span several years, and they expect an annual return of 20% to 100%. These are the strongest and wealthiest individuals, and this is their mindset. The main point of discussing this is to make everyone aware of who our opponents are, because when we enter the market, there are always people making money and others losing money; it doesn't just come from nowhere.

Technical traders come in various trading cycles. Some focus on daily charts, while others may look at second charts. For instance, in quantitative trading, they might make judgments every second, adhering to their fixed trading strategies. These traders typically have medium-sized capital, ranging from tens of millions to one or two hundred million; they often engage in price testing or limit orders, with most of the trading volume changing within a minute. For example, within a minute, transactions can already be completed. They are knowledgeable about many aspects, but they might also focus solely on one particular style. For example, capital flow traders concentrate on identifying trading traces left by other large traders and follow their lead.

(1) Market Making, which refers to market makers who are also a type of trader. Some of them use tools for arbitrage. For example, the price of Bitcoin on Binance might be 11805, right? While on Gate, the price might be 11820. So they will execute a sell action in one market and a buy action in another, earning a small profit from the price difference.

The patterns we see from such people are largely caused by their behavior. For example, at key price levels on a small scale, they can maintain the price, such as the upper and lower boundaries of a converging triangle. These *毛人 also like to hit other traders' stop losses and take the opportunity to complete their trades. Your stop losses are generally hit by such people. What the hell, I just got stopped out, and then it went up again, it's these people doing it. They can tolerate a certain amount of loss, with an expected profit of 0.5% to 10% per trade. These people expect an average annual return of between 550% and 300%.

Impulsive Trader

Focus on short cycles, but the shortest won't even look at one second; perhaps looking at a one-minute chart for an hour is already our focus limit. An hour, wow, how did this hour get swallowed up, what should we do? Right? Should the teacher cut losses? Such people generally do not have a fixed trading strategy and like to look at various analyses and news, for example, looking at K. They may pay attention to six or seven K levels, and the capital amount is generally relatively small. They all like to execute at market price, basically placing an order means it is already fully executed. They especially like futures, which we commonly refer to as contracts.

If options trading is used, it must be because one just saw a certain KOL's trade, mainly divided into two schools. The first school is called "I don't believe it will continue to rise or continue to fall." The first school believes it can still continue to rise or continue to fall. People in this category have all sorts of strange positions when they open trades, and most of the trading volume in small cycle fluctuations is provided by the third group of traders, which is why they are referred to as natural rebounds in the micro trading method. They are like the background, just like air, omnipresent, but they don't have the power of wind. It's a natural rebound; when it falls, it will definitely easily rise back. These people are particularly impressive; they can endure liquidation or a loss but cannot accept it. For each profit expectation, they hope that once they place a trade, they must earn at least half, right? They hope to multiply it several times, with an expected annual return rate generally being 100 times. This year, I entered the crypto space; if I don't make 100 times this year, I think it's meaningless.