Summary: Data has always been a crucial factor in making trading decisions in the cryptocurrency market. How can we uncover effective data to optimize trading decisions amidst the data haze? This is a topic that the market continues to focus on. OKX has planned a special column called “Insight into Data” in collaboration with mainstream data platforms such as Coinglass and AICoin, aiming to explore more systematic data methodologies based on common user needs for market reference and learning.
Table of Contents:
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What are the high-value data dimensions for novice users?
For advanced users, diversification of asset allocation is important, and how can it be helpful?
Timing is crucial, how can traders identify the best trading opportunities?
Overall, are there any undervalued data indicators?
How to cultivate a more scientific trading mindset?
Conclusion
Coinglass Research Institute: Novice users usually lack investment experience and professional knowledge, so they tend to prefer simple and intuitive data indicators. These indicators usually have higher reference value because they can quickly reflect market sentiment and trends. For example, indicators such as greed and fear index, long/short ratio, ETF fund inflow and outflow, and CME open interest changes are data indicators that novice users can quickly understand. These indicators intuitively reflect market sentiment and investor behavior, helping users quickly understand market trends and make wise decisions.
How can they understand these simple data indicators?
The key to quickly understanding data includes:
Frequently monitoring these indicators, such as ETF fund inflow and outflow, greed and fear index, and long/short ratio. When these indicators change, we need to use charting tools to intuitively analyze the relationship between indicator changes and price trends.
Viewing the historical trends of these indicators and contrasting them with price charts to understand the changes in these indicators and their corresponding relationships with the market.
Learning basic analysis methods, mastering basic technical analysis and market sentiment analysis.
Paying more attention to market news and analysis from cryptocurrency experts to accumulate more market knowledge and experience.
Practicing through simulated trading, using data for review to enhance data interpretation and application capabilities.
OKX Data Team: We have summarized the following four aspects and corresponding analysis tips for users’ reference:
1. Price Trend Data
Types: Current price, historical price trends, moving averages (MA), relative strength index (RSI), Bollinger Bands
Value: Price trend data helps users understand the basic direction of the market and identify buying and selling opportunities
Analysis tips:
– Moving Averages (MA):
Price above MA: Possibly in an uptrend
Price below MA: Possibly in a downtrend
Short-term MA crossing long-term MA: Possibly indicating a trend reversal
– Relative Strength Index (RSI):
RSI > 70: Market may be overbought, consider selling
RSI < 30: Market may be oversold, consider buying
- Bollinger Bands:
Price close to upper band: Possible resistance, consider selling
Price close to lower band: Possible support, consider buying
Band width narrowing: Possibly indicating an upcoming significant breakthrough
2. Volume Data
Type: Volume data
Value: Volume data reflects market activity, helping users judge the strength and sustainability of trends
Analysis tips:
- Volume-Price Relationship Basic Principles:
Increasing volume, rising prices: Prices rise as trading volume increases, indicating a potential continuation of an uptrend
Increasing volume, falling prices: Prices fall while trading volume increases, possibly indicating deeper declines and emphasizing trend reversals
- Volume Change Patterns:
- Characteristics: Market was relatively subdued in the previous period, with both volume and prices at lower levels. The volume gradually starts to increase, but the increase is gradual, not sudden and significant. Prices usually slowly rise with the increase in volume. During this process, there may be minor adjustments of volume contraction and price decrease.
- Possible implications: It may indicate that significant funds (also known as "smart money") are gradually entering the market. Significant funds usually do not buy in large quantities at once to avoid driving up prices. The market may be forming a new uptrend, and investor confidence may be recovering.
- Characteristics: Increased trading activity: More investors participate in trading, possibly due to price increases attracting more attention.
- Possible implications: A potential trend change signal is that some long-term holders may choose to sell at high points to take profits, while new buyers enter, leading to a surge in trading volume. Although huge volume may indicate changes, it does not always mean an immediate trend reversal. The market may continue to rise or enter a consolidation phase.
3. Fundamental Data
Types: Project announcements, partnership relationships, technical advancements, token economics, regulatory dynamics
Value: Fundamental data provides information about the long-term potential and risks of a project, helping make wiser investment decisions
Analysis tips:
- Pay attention to important announcements:
Evaluate the potential impact of announcements on project development
- Understand technical advancements:
Monitor the completion of development milestones to assess technical feasibility
- Analyze token economics:
Understand token supply mechanisms, inflation rates, and use cases
- Track regulatory dynamics:
Assess potential impacts of regulatory changes on projects
4. Market Sentiment Data
Types: Social media mentions, fear and greed index, derivative market funding rates
Value: Market sentiment data reflects investor psychology, aiding in determining potential market reversal points
Analysis tips:
- Social media heat:
Sudden increase in heat: May indicate short-term price volatility
Sustained high heat: Pay attention to whether there is excessive speculation
- Fear and greed index:
Extreme fear (0-25): May be a buying opportunity
Extreme greed (75-100): May be a selling opportunity
- Funding rates:
Sustained high positive funding rates: Strong bullish sentiment, possibly facing a pullback
Sustained negative funding rates: Strong bearish sentiment, possible rebound
Coinglass Research Institute: For advanced users, we recommend starting from the following dimensions:
1. Screening for potential coins: Use criteria such as price, market capitalization, circulation, and exchange listings to identify coins with growth potential for precise investment layouts.
2. Asset portfolio allocation: The key to asset portfolio allocation lies in using correlation analysis to select assets with lower correlations for allocation. This way, the risk of the investment portfolio can be effectively diversified, improving overall stability and return.
3. Derivative arbitrage opportunities: Discover and engage in funding rate arbitrage opportunities using a funding rate arbitrage calculator, thereby increasing the overall asset yield.
4. Portfolio monitoring: Use portfolio monitoring tools to test the profitability and risk of different investment strategies and regularly review and adjust them to optimize allocation strategies.
5. Risk management tools: Use various risk management tools and techniques such as stop-loss orders and hedging strategies to control investment risks.
OKX Strategy Team: Based on our observations, common tools used by this group of users include dollar-cost averaging strategy, portfolio arbitrage, and large order splitting. The dollar-cost averaging strategy reduces overall holding costs by regularly purchasing during price declines, and profits can be taken during price rebounds, repeating the cycle for continuous arbitrage. Portfolio arbitrage is a strategy that helps users hedge and reduce trading risks. This strategy can choose to trade different or similar currencies/markets simultaneously, taking advantage of market fluctuations and price differences to automatically and timely secure profits. Portfolio arbitrage can effectively help you reduce potential losses risks when facing future market uncertainties. Large order splitting is a convenient trading strategy provided to large-volume traders. This strategy helps users split large orders into smaller ones and place them in batches. With intelligent settings, the market impact of large orders can be minimized, while maintaining a higher average execution price level, greatly reducing trading costs for large-volume traders.
Coinglass Research Institute: Timing is crucial. In the previous question, we introduced some important data dimensions. These important data dimensions play a crucial role in helping users find the best timing for buying and selling.
Let me briefly explain from the perspectives of position building and profit-taking and stop-loss.
Position Building:
1. Liquidation heatmap: When the liquidation intensity is highly concentrated in a specific price range, it indicates that the price may move towards that area. Investors can build positions based on the direction with highly concentrated liquidation levels.
2. ETF fund inflow: For example, if the daily inflow of BTC ETF funds far exceeds its average daily inflow, it may indicate increased market interest in BTC. Therefore, investors can consider building or adding positions.
3. Bitcoin funding rate consistently lower than the benchmark rate (0.01%): This situation usually indicates that the market is going through consolidation or nearing the bottom phase, making it suitable for establishing positions at the bottom.
4. Significant increase in open interest: An increase in open interest indicates more funds flowing into the market, thereby enhancing market activity. This situation usually occurs before an uptrend. For example, if the open interest of CME Bitcoin futures suddenly increases by 10%, it may indicate that institutional investors are very confident in the future trend of the market, so building or holding positions can be considered.
5. Long-term low trading volume: Being in a long-term low trading volume usually indicates that the market is in a consolidation or bottom area, suitable for position building.
6. Increase in spot inflow: An increase in spot inflow indicates an increase in buying demand in the market, usually a buying signal. In this case, investors can consider building positions to seize the opportunity for market growth.
7. Low long/short ratio: A low long/short ratio means that bears have the advantage, and it may trigger short covering, leading to price increases. This is a good time for position building.
8. Greed and fear index: The greed and fear index is an index that measures market sentiment. When the index stays below 20 for a long time, the market is considered to be in a state of extreme fear, usually indicating a low point with opportunities for bottom fishing. Gradually building positions is a good choice.
Profit-taking and Stop-loss:
1. Liquidation heatmap: It can help traders quickly find the positions for taking profits and stop-loss. Setting profit-taking and stop-loss when the price is about to enter a heavily liquidated area can more safely lock in profits.
2. ETF outflow increases: If the daily outflow of BTC ETF funds significantly exceeds its average daily outflow, it may indicate a shift in market sentiment towards pessimism, and profit-taking or stop-loss can be considered.
3. Funding rates: High funding rates can be a warning signal. For example, if the funding rate of Bitcoin futures exceeds 0.1%, it may indicate an excessively bullish market. If high funding rates persist for a long time, it may lead to perpetual funding.
Futures contract prices have seen unsustainable increases, leading to market adjustments and even crashes. Conversely, if funding rates remain low for an extended period, it indicates overly pessimistic market sentiment and potential overselling. This often leads to unexpected market reversals, presenting potential trading opportunities.
Key indicators to consider include:
1. Open interest: A sudden decrease of over 10% in Bitcoin contract open interest reflects low market confidence, indicating a need to reduce positions or take profit/stop loss.
2. Large liquidation: Rapid price declines leading to a large number of liquidations may result in a quick market rebound, presenting an opportunity for investors to enter the market during the rebound.
3. Increased outflow of spot assets: An increase in spot asset outflows indicates increased selling pressure in the market, signaling a need for profit-taking or stop-loss measures to avoid significant losses.
Significant changes in the long/short ratio, greed/fear index, and other data dimensions can also indicate extreme market fluctuations, requiring investors to be vigilant and consider adjusting their positions and setting profit-taking and stop-loss measures to adapt to market volatility.
In addition to traditional indicators, it's also important to consider the inflow/outflow of funds in ETFs, options market data, stablecoin flows, network effect metrics, and DeFi activity metrics. Investors should also develop a systematic approach to trading, including maintaining objectivity, learning data analysis and risk management, accumulating trading experience, and continuously improving their strategies through simulation and quantitative analysis.
The above information is provided for reference only and does not constitute investment advice. Investors should carefully consider their financial situation before trading or holding digital assets. Holding digital assets involves high risk and may result in substantial volatility. It is important to consult with legal, tax, and investment professionals regarding individual circumstances. Additionally, readers are responsible for understanding and complying with relevant local laws and regulations. This content is provided by the official source and does not represent the position or investment advice of this platform. Readers are advised to carefully evaluate the information themselves.