Logic, patterns, and randomness in the crypto and stock markets - Institutional order placement techniques in cryptocurrency exchanges

Technical analysis reflects investors’ understanding and comprehension of the logic and patterns in the coin and stock markets. It embodies investors’ efforts to explore the complex phenomena of market movements from different perspectives and using various methods. It also carries investors’ expectations and pursuits of foresight.

Do the rises and falls of indices and coin-stock prices follow their own logic and patterns? Of course they do. People entering the coin-stock market are all driven by profit, which can only be realized through price fluctuations. The profit source is the spread created by buying low and selling high. This is the foundation of the market’s movement logic and the origin of its regularity.

Speculative tools like short-selling mechanisms can negatively impact normal logic and patterns, but they also have their own logic and certain regularities. The smaller the capital scale, the more flexible the inflows and outflows, and the more randomness in speculation. From an individual perspective, its regularity weakens, but from a group perspective, within the overall trend, some regularity still exists. The larger the capital scale, the greater its influence on the market, but its buying and selling become more difficult. Therefore, large capital tends to have stronger purposefulness and continuity in speculation. All these are patterns that constantly influence market movements.

Various internal and external factors affect the market. Investors are always under these influences, and their moods and emotions can change at any time. These influences include logic, patterns, and randomness. Under their combined effects, the market exhibits a colorful and complex state. The logic and patterns are the targets of technical analysis, the soil and nutrients for its growth, and the stage for its display of skills and charm. However, randomness constantly undermines the credibility and power of technical analysis. This is a contradictory process. Some powerful forces deliberately influence or even control the trend of individual coins, stocks, or indices, shaping technical indicators, conveying messages they want the market to understand, and guiding market judgments to align with their intentions. All of this has logic and patterns, but also originates from randomness.

When the coin-stock market first appeared, technical tools were scarce, technical skills were low, and people’s investment experience and basis were very limited and blind. Later, various technical tools that could visually describe market movements, such as candlestick charts, volume bars, etc., emerged, which investors regarded as treasures. Subsequently, a variety of technical analysis tools appeared, opening new perspectives and reducing blindness in trading, significantly increasing success rates. Each technical analysis tool is the result of careful research by predecessors, validated by the market, and has its own value under appropriate conditions. Consequently, many followers emerged. With the rapid advancement of information technology and artificial intelligence, technical analysis has now reached an unprecedented height, and it is certain that it will continue to develop.

When used properly, technical indicators can indeed play a significant role. It is no wonder that many people are enthusiastic about technical indicators and like to mention them frequently. Those who believe in technical analysis are eager to call themselves technicalists, which gives them a mysterious sense of pride. Some even say that trusting technical analysis is more important than trusting the coin-stock prices themselves. Superficial phenomena are often deceptive; true reliability comes from inner substance. Technical analysis is that inner substance, and being a technicalist means possessing that inner substance.

But there is another side. The market not only has its own logic and patterns but also possesses forces that can destroy logic and disrupt patterns. Short-selling mechanisms, leverage, speculative behaviors—they are all negative forces. The main players who wield these forces are large-capital entities with strong strength. Moreover, the attitudes and behaviors of retail investors, driven by goals, intentions, and strategies, must influence the market to achieve their aims. The combined impact of various positive and negative sudden factors inside and outside the market further increases randomness. The randomness in the coin-stock market is omnipresent and often far exceeds the influence of logic and patterns.

To be precise, the coin-stock market is a stochastic system with inherent logic and basic patterns. Randomness is a fundamental attribute of the market. However, most technical analysis is not designed to address randomness; only a few consider it, and even then, only subordinate to other factors. In the face of randomness, all technical analyses become ineffective. The most reputable proponents of factual and realistic technical theories emphasize this point in unison. It is an objective fact that should not be ignored or overlooked. Although this is uncomfortable and frustrating, it is undeniable.

There are no, and will never be, magical theories, indicators, or analysts in the coin-stock market. While the market indeed has its own logic and patterns, there are no perfectly obedient individual stocks or trends. In the face of this reality, successful cases where technical analysis alone achieves success are rare. Yet each of these successes inspires technicalists and ordinary investors alike, filling them with joy, remembrance, praise, and longing. Conversely, over-reliance on technical analysis often leads to setbacks, which are numerous and discouraging, causing many to lose confidence, become frustrated, and even abandon technical analysis altogether.

The correct understanding is that the coin-stock market is a stochastic system with inherent logic and basic patterns. Recognizing that randomness is a fundamental attribute of the market clarifies how to approach technical analysis. The correct attitude is: understanding, referencing, emphasizing empirical evidence, and avoiding superstition. This is because the market objectively possesses internal logic and basic patterns, and technical analysis helps investors grasp these. It is useful and beneficial. Emphasizing empirical evidence and avoiding superstition is essential because the market’s fundamental nature is truly a random system that can never be fully governed by logic and patterns. The market holds supreme authority; no theory or tool can influence or even fully understand it. This will never change, regardless of who or what is involved, not even AI.