Trading Concept Compendium (3): Market Minimum Resistance Direction

The Trading Concepts Supplement Series aims to share some "rarely mentioned but extremely important" trading concepts, which I believe both newbies and crypto veterans can take away something from this series of articles. This series contains a total of 10 articles, and this is the 3rd one. (Recap: Trading Concepts Supplement (II): Taker, Maker, and the Principle of Price Movement) (Background Supplement: Using Bitcoin's 2021 double top structure as an example: Discussing what "future data leakage" is) What are Support and Resistance? "Will support rise?" "Will resistance fall?" Essentially, each technical analysis school has its own definitions of support and resistance, including concepts from intricate theory, harmonious trading, morphology, SMC, on-chain data, etc. In the previous article, we discussed the principle of price movement. If you haven't read it, I suggest you take a look first; otherwise, the following content may not connect seamlessly. First, what exactly are support and resistance: Support: When the price drops to this level, buying pressure appears, slowing the rate of decline. Resistance: When the price rises to this level, selling pressure appears, slowing the rate of increase. Taking resistance as an example, let’s assume we have a god's-eye view and find that when BTC's price rises to 120k, there will be "resistance" appearing, meaning there will be "sell orders" at this position. The question arises: Is this sell order a "Maker" or a "Taker"? Since active Takers are almost impossible to "predict" (stop-loss orders may have some chance), most effective analysis should focus on "Makers". For example: If a large number of maker sells appear at 120k, it will be referred to as "resistance", and these large maker sells will significantly hinder the rise. At this point, some quick-reacting readers should have noticed: "Makers do not drive the price; it is Takers that move the price. So why should it fall when reaching the resistance level?" A big question, but don't rush; keep reading. Market Minimum Resistance Direction Next, we can introduce the concept of "Market Minimum Resistance Direction". First, the eternal law is: Takers are the main driving force behind price movements. Under this premise, we can simply categorize the "Market Minimum Resistance Direction" into two types: Macro: For example, monetary easing or tightening, stock-bond cycle, etc. Micro: Maker buy, Maker sell, liquidity clusters, etc. We won't discuss the macro aspect here; this article will focus on the "micro" to elaborate on two major principles. First: If Maker sells are thick, it hinders upward movement; if Maker buys are thick, it hinders downward movement. Second: If Maker sell > Maker buy, the minimum resistance direction is "downward"; if Maker sell < Maker buy, the minimum resistance direction is "upward". The concept itself is not difficult to understand: under the premise of "no strong Taker intervention", prices often exhibit a fluctuating trend. The Takers in the market will ultimately choose to move in the "least resistance direction". If there are more maker sells, it indicates that "the difficulty of rising > the difficulty of falling"; if there are more maker buys, it indicates that "the difficulty of falling > the difficulty of rising". Words are not enough; let’s look at the practical effects. Quantifying the Minimum Resistance Direction Before we continue, it’s essential to know two important premises: The liquidity of the product itself must be good (the depth of two-way makers must be sufficient). Strong Takers can "ignore the minimum resistance direction" in a short time. Here’s a supplement regarding point 2: Generally speaking, if there is a strong Taker intervention (such as significant Favourable Information or Unfavourable Information), the method of using Makers to observe the minimum resistance direction is likely to fail! I made a chart; the attached image shows ETH’s price movement from September to November 2024. The red and green indicators below are comparisons of maker buys and maker sells captured within a certain range. Green = maker buy > maker sell Red = maker sell > maker buy The rest, I believe I don’t need to elaborate; the effects are visible in the image. The only thing worth mentioning is on the right side of the image: at that time, when Trump was elected, the crypto market experienced a wave of main rise, with strong Taker intervention causing the indicators to be misaligned for a period. Conclusion Finally, let's preemptively answer a few questions: Q: Where can I view the indicators in the image? A: Any website monitoring makers and order books can be used. Q: How much depth of makers should be captured? A: Try various amounts and you’ll know; don’t just seek the answer; that’s not the purpose of my writing. Q: How to use this indicator? A: It helps to determine the current minimum resistance direction of the price and should be combined with other methods (such as monitoring Takers and analyzing Liquidity) for optimal use. That concludes the content of Trading Concepts Supplement (III). I hope it helps everyone; thank you for reading this far. Original link: Related Reports Interpretations of 6 Current Situations in the Web3 AI Track: Compared to AI Agents, institutions are more concerned about infrastructure. AI Agents merging with Web3, are Bots ushering in an era of on-chain finance? Complete Introduction to Mind Network: Using FHE technology to solve AI Agent security issues <Trading Concepts Supplement (III): Market Minimum Resistance Direction> This article was first published on BlockTempo, the most influential blockchain news media.