• By admin
• 10 May, 2023

The number one reason for a market to spike is a thin order book. The price and market are consequences of interested buyers and sellers at every price level. If you want to buy one billion dollars worth of a token and there is a supply at that price, you won’t be able to move the price. But with just $10,000, you can move 50% of an asset if nobody wants to sell to you unless you pay a 50% higher price than the current price 📝

🧩 Playing FOMO 🎲

Often, people want to buy something at a much higher cost when there is FOMO surrounding that particular asset. 

FOMO is not good, nor can it sustain itself all the time. It’s like when you're drunk—you can feel high, but you can’t stay high all day every day. You need to come to your senses or you’ll start getting your ass kicked by the people you live with 🤣

⚠️ Consequences 😳

An asset spiking in a very short period of time sounds fun and great, but it is harmful to the chart as it messes with support and resistance levels without any sort of thinking or logical behavior. 

Price action analysis is all about navigating through the logical behavior of traders, not about sudden hype. Sometimes, though, spikes happen, but they’re not based on rational thinking.

🚨 How the market resolves this? 💉 

Just because something is now trading 50% higher in an hour doesn’t necessarily mean that asset is now worth 50% more. 

When FOMO is over, other traders or participants want to sell, and the price starts correcting. After FOMO fades, more people join and they decide the future price. 

Those who had nothing to do with the FOMO usually lead the market back to the old price or where the significant selling pressure happened until it finds one of the old regular participant levels, such as a healthy support zone 🧠 

🔮 The exception 🧐

Sometimes, you can get a very quick move from a chart formation though that doesn’t mean those are bogus moves, such as a breakout of a falling wedge or other chart patterns. 

Due to a long period of price compression, you can often see a big move as buyers or sellers take control completely or lose control completely. But you will always find volume behind these moves, by looking at the volume, you can tell if that move is healthy or unhealthy. 

Sometimes, if enough faithful traders believe this is the new price, the market can stay there without any significant pullback. If an internal move survives a spike for a couple of days, it might endure. This is why understanding context is important. 

This lesson can also work for a sudden dump in the market in just an opposite way, both spike and sudden dump are same thing 🔑 

I have provided two examples below, I like the ONDO one 😉

I hope you’ve enjoyed this lesson, and value this FREE additional content. As a trader they’ll be invaluable for you now and of course in the future. Join our Discord community for more content like this: https://discord.gg/jvUjBud5j4