Know your enemy and know yourself, and you will never be defeated in a hundred battles.
Written by: Dave's Perspective on Speculative Capital
Chapter 2 of the Secondary Revelation Series: The Art of Trading. In the previous chapter, we clarified the secondary concepts and three major framework models. This article will continue to explore in a straightforward manner, enriching our toolkit for market analysis. This article will be quite technical; people generally dislike lukewarm articles, preferring either pure entertainment or absolute practical insights. However, there’s no need to worry; I will explain the logical derivation of principles, highlight key points that can be memorized, and include interesting anecdotes.
"The Art of War" by Sun Tzu, written during the Spring and Autumn period, consists of thirteen chapters, each focusing on different aspects of military strategy. Wang Anshi described it as "strategies that are profound and far-reaching, not limited to warfare." Drawing on the wisdom of predecessors, the "Art of Trading" consists of 5 sections, summarizing some common market trends, as follows:
Contract Trading
American Strong Manipulation
Clear Dealer Trading
Wyckoff Development Model
Miscellaneous Trading Discussions
In the "Art of War," it is stated, "Know your enemy and know yourself, and you will never be defeated in a hundred battles." Without further ado, let the generals heed the command; the main content begins.
1. Contract Trading
Let’s fill in the gaps from the first chapter and discuss how traders profit through the linkage of contracts and spot trading, along with the signals we can observe. First, I will share two posts where two masters explain in detail the process and principles of short squeezes by dealers.
https://x.com/wublockchain12/status/1805786970515537973
https://x.com/Michael_Liu93/status/1916131432193527842
Starting from the beginning, Phase One: Accumulation and Initiation.
If you carefully read my first chapter and remember, you might recall I mentioned that the secret of manipulation lies in liquidity. For the vast majority of dealers, their way of making money is to drive prices up, there will definitely be a price elevation phase. Since there is a price elevation phase, the chips must be concentrated during this phase; otherwise, the selling pressure at higher levels will be too great, posing a significant risk to the dealer, potentially leading to losses. Therefore, the first phase is about organizing and accumulating, and all dealer coins cannot escape this phase.
I will use UMA as an example since I happened to be working on this coin while writing. First is the accumulation phase; you can see that UMA fell from around December 2024 to March 2025. This phase marks the end of the previous dealer's operations, and now the chips are very scattered, allowing for a downward trend. However, starting from the end of March, it began to consolidate with increased volume, and after nearly three months of bottom consolidation, it formed a relatively complete range; this is the accumulation phase.
What tasks did the dealer complete in Phase One?
Accumulated chips at low levels to control circulation.
Raised funds to gain control over the market.
Repeatedly tested the market's temperature.
Next, the dealer can begin operations in Phase Two, Phase Two: Establishing Long Positions in Contracts. This is the dealer's entry method and the start of operations. Here, I must mention the OI (open interest) indicator, which refers to the number of outstanding contracts. At the beginning of the article, I mentioned that I would explain principles and also highlight key points to memorize; here, I won’t derive it but will directly state the operational conclusion: when OI fluctuates abnormally, especially when it rises sharply, you need to be cautious; this is a signal of war. Compared to the accumulation phase, this signal is more direct; in the accumulation phase, you don’t know how long the consolidation will last, and horizontal trading is quite common, making it hard to determine if there is really a dealer accumulating behind the scenes. However, a sharp rise in OI is a straightforward signal. So, you can simply remember: For small coins, a sharp rise in OI after sufficient consolidation indicates a potential market rally.
Using UMA again, after the sharp rise in OI, the market price increased shortly after. Although it’s not a strong causal relationship, I just want to illustrate that they are highly correlated. Since holding long positions is a key step for dealers to profit, how do they specifically make money?
Next is Phase Three, Funding Rate Explodes Short Positions.
To prevent the latest contract prices from deviating from the latest spot prices, every 8 hours (now 1 hour), the funding fee is paid by long position holders to short position holders, or vice versa, thereby narrowing the gap between the latest spot price and the latest contract price. Therefore, for long-position dealers, since the number of short positions in the contract market is far greater than in the spot market (after all, the sell orders in the spot market are in the dealer's hands), the funding rate is negative, meaning shorts will pay fees to longs. In the case of small coins, the funding rate is usually quite substantial, allowing dealers to earn a significant amount just from this cash flow. Additionally, with this continuous cash flow from the funding rate, dealers will transfer the received funds into the spot market to drive up prices, thus forcing the short positions in contracts to be liquidated, which will also increase the profits from their long positions. Finally, don’t forget that dealers hold spot assets, and the main theme is always to buy low and sell high.
So we can summarize the dealer's profit-making methods:
Funding rate, driving up prices to explode shorts, and chip distribution.
However, in actual operations, not all three methods are necessarily present. Finally, in the collapse process, when the dealer has sold all their goods and closed their long positions (OI decreases), they will decisively abandon this worthless stronghold like a cold-blooded general.
For example, after the operation of the Alpaca coin, the chips became very scattered, leading to its decline. Here’s a thought-provoking question for everyone: What is the trading process and chip structure change of the Alpaca coin? Feel free to discuss in the comments.
This concludes the first part on contract trading; I welcome more professional dealer groups to provide guidance.
2. American Strong Manipulation
The term "American" often refers to violent aesthetics, categorizing this type of development model as American Strong Manipulation. On one hand, it is because they indeed employ violent aesthetics in driving prices, and on the other hand, it is often coincidentally that their dealers come from North American groups. This is a market model that must be mastered.
Characteristics of American Strong Manipulation include:
The market is strong. There is significant buying power, and the price increase is considerable.
The duration is relatively long. For most coins, a main rally typically lasts 3 days, and American coins are no exception, but they do not experience rapid declines, often using horizontal movement instead of sharp drops or small gradual declines.
There are no comfortable entry points. The pullbacks are weak, and the price increases are substantial, making technical patterns on candlestick charts negligible, leading to a situation where one can only observe without daring to enter.
As the strategy suggests, let’s look at a practical example: SOL.
The first segment of Solana belongs to American Strong Manipulation, while the latter is a mixed rotation as the ecosystem developed. Let’s review the first segment.
First is the accumulation phase; all markets cannot escape the accumulation phase. Just like the college entrance examination, all conic curve problems cannot escape simultaneous equations. One way to score points is to write down the equations regardless of the specifics; getting one right will always earn partial credit. The early phase is also a classic case of a downward accumulation; during the downward trend, retail investors are more likely to lose patience, and the second pullback is very evident, representing the accumulation phase. The entire accumulation area has a fluctuation range of about 30%, which is not large, but the duration is relatively long; unless one is a firm holder, most would sell.
A sudden thunderclap, revealing the American character. When trading coins, how do we identify the type of market? It is in such moments. As the overall market starts, SOL suddenly shows a very strong leading momentum. During the market development, if you only look at the candlestick chart, you will notice several reversal patterns, meaning that from a technical analysis perspective, this area should be bearish, but it completely disregards the technicals and shoots straight up. Meanwhile, the fundamental ecosystem seems to have no significant changes, and there are no decisive negative news, yet the overall increase reached 210%. This generally indicates that institutions have entered the market, such as a foundation raising a large sum of money to start driving prices.
During the hesitation and adjustment period, the entire pullback period has two platforms, basically showing little decline, characterized by small fluctuations, making it hard to see a downward trend. Especially in the second platform of the adjustment period, a beautiful consolidation occurs at the previous high position, indicating that this is not a false breakout; if it’s not a false breakout, it means this market remains very strong. The dealer may have plans to distribute chips, but they won’t execute an A-shaped cut. This is a situation where one can ride the bubble and bet on the final wave.
Finally, there is an accelerated upward surge. The dealer initiates the last wave purely following the overall market trend, and as expectations and support build up, the price rises as high as the sentiment allows.
Reflecting from a trading perspective, first, the second phase of the sudden thunderclap is a characteristic stage of this market; not every market can perform a complete three-wave structure like SOL. Therefore, we should actually seize the opportunity in the second phase; at this time, if you look back at the second segment, did you find a suitable entry point? If not, that’s correct; this is the characteristic of American markets, where one dares not enter. https://x.com/0xDave852/status/1918142304105427063
The link above is another long article I wrote, specifically analyzing SUI, which is also an American Strong Manipulation. You can check it out; I found my entry point at the end of the second phase, and whether the third phase can rise is a gamble.
The third phase of SOL is very important; it gives us great confidence to move upward.
I just mentioned a term called A-shaped cut; you might not know what it means, so let me show you what an A-shaped cut looks like.
Layer:
A standard American Strong Manipulation A-shaped cut; during the previous price-driving process, you can’t find an entry point at all, bulldozing upward, and the last line directly drops by half. However, the dealer's cost is very low; if you have traded this coin, you would know their trading skills are above average compared to other coins, and their combo moves are very flashy. Everyone must be cautious on the battlefield.
In the third phase, I want to remind everyone that talking about trading on paper may seem easy, but when you actually enter the market, you are very likely to incur losses because you will often get stopped out by price spikes.
So how should we operate? After determining that the market is under American Strong Manipulation, the best strategy is to seize the phase of sudden upward movement. Don’t be afraid; be bold in chasing high prices. If you can’t find the logic and everyone can’t explain the reasons, then that’s right—go for it. The second method is to look for team and background information. You can read my article "The Seventh Dealer of the Night" to analyze development potential from a perspective that transcends technical and fundamental analysis. Finally, try to engage in breakout trading. If you look at the third phase of SOL and think it’s a sweet entry point, then take a look at Layer; if you entered during the consolidation above, wouldn’t that be a mistake? Wouldn’t it be better to set a stop-loss? With a stop-loss, you might get stopped out during the consolidation phase, and you really need to experience the market firsthand to understand this; there are many tricks to deceive both upward and downward movements in this phase. So, you either need to catch the bottom of the range with a conservative stop-loss or go for a breakout.
After all this reading, you might feel a bit tired. An interesting tidbit is that the three coins mentioned above are all backed by teams and major institutions from North America, so it makes sense to call them American Strong Manipulation.
The patterns described above have a wide range of occurrences, are highly profitable, and have distinct characteristics, making them worthy of your attention.
3. Clear Dealer Trading
The name "Clear Dealer" is quite interesting; dealers usually hide behind the scenes, so how can it be called "clear"? The third type of market pattern is primarily judged by off-market signals or comprehensive judgment, relying on logical reasoning and tracing the subtle signs of capital. Clear Dealer Trading falls under the perspective interpretation of designated individuals discussed in Chapter One of the Secondary Revelation.
The principle of this market is that there is a designated dealer group that must raise the price of a certain token to achieve a specific goal. Because we know that manipulating prices is not just for profit, it can also "raise faith." Driving up prices has many benefits, such as generating buzz, but it also requires careful cost control.
The secondary characteristics of this type of market vary, but the development logic can be summarized. A classic approach is the "one brings a nest" strategy, where raising the price of a specific token can create a wealth effect that boosts the entire sector or ecosystem tokens, achieving significant long-term gains. Another classic approach is the "arrow on the string must be released" strategy; if the price of a certain asset is not raised, the entire front line may suffer a blow. For example, MSTR—I've been closely following this stock, and it’s quite telling. We all know that when MSTR rises, its multiples far exceed those of Bitcoin, but when it falls, it doesn’t bite too tightly; you can even feel MSTR's strength at the bottom. This might be because if the stock price is allowed to fall, it could trigger a chain liquidation, so there is power to support the price.
We will illustrate these two types with examples. To be honest, the things on the secondary market are easier to quantify; when it comes to capital markets and emotional markets, it becomes a bit mystical, but this is precisely where the skill level of traders is differentiated. Let’s feel it together through examples!
3.1 Raising Faith: BGB
BGB is the platform token of Bitget exchange, currently only available for spot trading pairs on Bitget & MECX, and is humorously referred to as a kind of single-player coin. From the end of October 2024 to the end of December 2024, the price of BGB rose more than six times, making it a strong example of a clear dealer driving up prices.
Next, let’s outline a few key signals for judging the opportunity with BGB:
1. Subjective price-driving logic: Raising heat in fierce competition. Back to the end of last year, the competition among exchanges officially entered a heated phase, with existing users fighting fiercely, and the bottleneck of new users limited every CEX in the market. Coupled with the rise of Hyper, the competition for market share among centralized exchanges became very intense. Major exchanges began their self-rescue plans, such as the wealth explosion of BGB. I actually have quite a few friends who profited significantly from this wave; the exchange's price-driving of platform tokens became a hot topic at that time. I remember the most exaggerated moment when I saw on Xiaohongshu that someone claimed their boyfriend made 800,000 from BGB, and the intense first-level news and second-level market interaction indeed pushed Bitget into the spotlight. At the same time, it injected a lot of confidence into everyone. A good example is that many friends who bought BGB at a low price did not sell at the peak but instead sold 40% to 50% lower, indicating that at the peak, people truly had faith.
2. Objective reasons for price-driving: Salvaging reputation after an incident. On October 7, Bitget experienced a major incident where a large holder sold their BGB, causing the token price to plummet by 50% in an instant. Although the exchange later recovered all the losses, this incident severely triggered concerns about the exchange's liquidity and depth, and the real trading volume of BGB, as well as its value judgment, faced significant challenges. Although the exchange's subsequent public relations and rescue efforts were well executed, we still need to let facts speak; an incident indicates a lack of capability, and people will naturally have great doubts about the future of the platform token and even the entire trading platform. Therefore, driving up BGB was also a measure to salvage the reputation after the incident, using an unreasonable wealth effect and extensive publicity to alleviate everyone’s concerns.
3. Special consideration: Excellent chip structure. As mentioned earlier, BGB is somewhat of a single-player coin, meaning a large amount of chips are held by the exchange and related institutions, allowing them to control the selling volume. Controlling the chips makes it very easy to drive up the price, and since the clear dealer coin does not necessarily need to profit much on its own, raising faith and visibility is also a consideration, allowing the market-making team to push it up freely. In fact, by the end of this coin's rise, it felt like everyone was making money from market capitalization, but compared to trust, the money spent can be considered negligible.
I’ve shown you an example of an aggressive price-driving strategy, and I hope you can appreciate the flavor of this off-market maneuver. I want to clarify that this example is not meant to criticize the Bitget platform. On Pizza Day, Twitter was very lively, with everyone sharing gifts from exchanges, but only @Yuanzhuolabs, @TokenPocketCN, and @xiejiayinBitget brother @BitgetWalletCN sent me gifts. So from my perspective, regardless of how much criticism there is for BG, I am quite grateful to them, haha. At the same time, this price-driving event could have been recorded in the history of platform token operations and marketing.
3.2 Fighting Back: TST
TST is a leading meme coin on the BSC Binance Smart Chain, a coin that surged a hundredfold during the hot dog craze, and it’s one of the few that I profited from. TST's development has been bumpy, but the final violent price-driving was a situation where the arrow on the string had to be released; we will tell the story while discussing the logic.
On February 6, 2025: The BNB Chain officially released a tutorial video for creating tokens, deploying the TST test token. Under the meme craze, the community began to speculate, mistakenly believing that TST had "official endorsement," leading to a rapid price increase. At this point, TST had already become a pioneer in BSC meme coins; the capital market always places a premium on the concept of "the first." TST's position was already quite significant, but in the early chaotic phase, neither the project party nor the market had a clear logic regarding TST.
On February 7, @cz_binance made a puzzling move by posting a statement declaring that TST had no relation to Binance and urging everyone not to speculate recklessly. From the perspective of this technical boss, I can understand his thinking; CZ is someone who values real value. Whether it’s founding the BSC chain or his series of investment styles, he has never been too keen on the entire meme nihilism hype, and issuing this statement is a classic NFA to avoid suspicion. However, the big brother overlooked one issue; we have had this habit since 2017, the more a big shot denies something, the more people feel it is authentic. Many projects back then would ride on Vitalik's denial comments, and the big brother might have forgotten that habit, so after TST's denial post, it plummeted 70% before bizarrely rebounding and stabilizing, and the most frightening part was that the discussion around it peaked. At this point, the core price-driving logic emerged:
In the second phase, the clear price-driving, TST rose tenfold. I entered during this phase, and when asked why it rose, remember our second type of clear dealer model? "The arrow on the string must be released," all eyes were on TST; at this moment, it had already been priced as the leading meme coin on BSC. If Binance did not drive up this coin, people would lose faith in Binance in the future, essentially abandoning the entire dog coin track and even the future of the entire chain.
At this point, the investment logic became very simple: it was a bet on whether the Binance team could deliver. You have to know that at that time, there was a lot of criticism online against Binance, saying that its market share was severely eroded, that it was out of touch with trends, that its friend circle was chaotic, and that it was corrupt, almost on the verge of collapse. But as an old investor, I have great faith in Binance; some trust does not require logic. I have witnessed countless times @binancezh's miraculous comebacks and do not need to bet like a little angry youth that they will admit defeat this time. With this understanding and the clear dealer market structure, I felt very confident in putting my money in. The subsequent story is well-known; now there are many Binance fans on Twitter, and @heyibinance has powerfully countered all those who doubted Binance's downfall, while Binance continues to dominate and crush other exchanges. However, the peak generates hypocritical support; steadfast logic is the true believer. I hope everyone can see through the facade and invest in good projects with conviction.
The pullback after the price-driving phase ended is a very standard flag consolidation, and then the secondary phase is left to the market to play out.
Binance's marketing strategy of "letting the market speak" is concise, efficient, and elegant. Compared to the overwhelming Sun-style marketing and the mobilization of the BG marketing strategy, Binance's marketing strategy, which lets the market speak, is, in my opinion, the most challenging yet most direct approach to the core.
For example, after TST, the meme coins on BSC flourished, and the Binance wallet soared as well. Even today, the Alpha new listing series is influenced by the boost from TST, which is a classic example of the "one brings a nest" strategy. Let me give you another simple example: ORDI. The second phase price-driving of Ordi by Binance actually aimed to tell everyone that although OKX monopolized the inscription issuance market, the real secondary pricing still lies with us. This wealth creation action has also been very effective; even today, the wealth effect of Binance's new listings is still influenced by the price-driving from that year.
I didn't expect to write so much about the clear dealer trading. Personally, my favorite is the American Strong Manipulation discussed in Chapter Two, perhaps because there are more little stories in the examples of clear dealer trading. The length is not short, but it should be quite easy for everyone to read. Next, let’s briefly discuss the classic Wyckoff development model:
4. Wyckoff Market Model
This section is about technical analysis. To deeply learn the Wyckoff technique, one can read several books. Here, we will briefly discuss the macro structure of the entire market.
"From the early 20th century to the present, the fundamental market judgment principles followed by renowned financial institutions are largely summarized from Dow Theory and Wyckoff Theory; they just don’t say it out loud. They prefer that average traders use indicators like moving averages or MACD because they know deeply that the users of these superficial tools are the source of their profits."
A complete trend cycle can be divided into the following four main stages: Accumulation, Markup, Distribution, and Markdown. As shown in the figure below:
Accumulation Stage: The main force gradually buys assets in a low-price area to establish positions, with prices typically in a sideways or narrow fluctuation state.
Goal: The main force quietly accumulates enough chips to prepare for the subsequent rise.
Markup Stage: The price breaks through the accumulation range and enters an upward trend, with the main force pushing the price up to profit.
Goal: The main force profits by pushing the price up while attracting more buying interest.
Distribution Stage: The main force gradually sells holdings in a high-price area, distributing chips to retail investors, and the price again enters a sideways or fluctuating range.
Goal: The main force completes selling at high levels to prepare for a downward trend.
Markdown Stage: The price breaks below the distribution range and enters a downward trend, with the main force basically liquidating positions, leading to an oversupply in the market.
Goal: The price returns to a low level, and the main force may start accumulating again, forming a new cycle.
The Ethereum cycle in 2017 is quite classic; let’s take a look at the actual market. I won’t mark the stages on the chart; after reading the analysis above, you can find out which stage corresponds to each range.
It is important to note that, first, in actual trading, there are many, many variants of the Wyckoff pattern; a perfectly textbook-like trend is almost nonexistent. It’s more about those who learn from me live, while those who imitate me die. Mastering the logic and being flexible is the most important. Second, the main force also knows this analysis method, so in actual trading, the main force's deceptive lines can be very frightening, with many false moves. This is something that one must experience to truly understand; experience can only be accumulated in real combat. Finally, NFA, Dyor.
5. Casual Discussion on Various Markets
The above summarizes several classic development models. Compared to the ever-changing market, my experience is almost negligible. Finally, I will casually discuss some market patterns that may still have rules. I don’t have a firm grasp on them, but I share them for your reference. The so-called rules mean that there is a logical support behind them, and they operate according to principles. Only such market trends are relevant to us. Pure retail trading or PVP, I think, if you don’t have the skills, it’s better not to take on porcelain work. Experts are welcome to discuss freely.
5.1 Money Laundering Markets
The scale of the gray industry and its profitability far exceed my imagination; it can be said to be shocking. The markets involved in money laundering in the crypto space often see astonishing price increases. There are two categories you can research:
The first type is black market currencies, such as Bitcoin in 2013, and now Monero (XMR), Hype, and TRX. These public chain currencies are very convenient for black market settlements or wash trading, and they have great potential in the post-Bitcoin era. I have also been researching them recently and may write a small article about it later.
The second type is the money laundering markets themselves, such as Bome, which increased fivefold in one day. Many hackers like to convert funds into ETH; they may find low-quality coins on Ethereum to wash trade. I’m not very familiar with the traces on the chain, but there may be some leads.
5.2 VC Coins
VC coins are excellent shorting targets. Let’s first discuss why coins listed on Binance often drop, which has almost become a reliable money-making trading opportunity. The fundamental reason lies mainly in the loose chip structure; before listing, there are airdrops and launch pads that distribute many coins to retail investors. After listing, the dealers naturally have no reason to support retail investors, leading to mutual selling and price drops.
In this type of market, VC coins are even more severe. Since VCs hold a large number of uncirculated tokens, they are eager to sell, and VC coins often have the bad habit of being overvalued, making it difficult to find new dealers to take over. Therefore, shorting some low-quality VC coins is a good choice.
5.3 Asian Dealer Markets
Asian dealer markets operate almost under the same logic as American dealer markets, but the rise and fall of these tokens often happen very quickly. In fact, in my view, they can be overly aggressive, completing two months of American dealer market movements in just three days. Coincidentally, the project parties, market-making teams, or institutions behind these tokens are often Asian. For example, the Chinese coin, which I jokingly named the Asian dealer market, and coins like Trump and Milei, one is operated by North American dealers, and the other by Asian dealers. There are even rumors that the Argentine president Milei's coin was issued by a Shenzhen group, which has a completely different scale and speed.
For example, TRX; if you look at it through the American price-driving logic I mentioned in the second chapter, each stage can roughly match up, but the speed is just too fast. It’s reasonable to suspect that the operators are a few aggressive post-00s, while I, a post-04 who trades with heart, can’t keep up with the young people who trade with instinct. In this fast-food market, you really need to be a player, not a romantic; you need to act on instinct, not on heart.
Sigh, when will we Asians be able to be more enduring? We should learn from the Americans; it ends before we even realize it.
There are many more types of secondary markets; I’ll stop here for today. Everyone is welcome to discuss in the comments.
Conclusion
In Sun Tzu's Art of War, "The Chapter on Deception": "There are no constant conditions in warfare, just as there are no constant shapes in water." This article on market tactics has been written for nearly ten thousand words, primarily to share logic and experience with everyone. However, of course, we should summarize the development models of the market, which will be helpful for future secondary trading. If nothing else, you can treat this article as a cheat sheet to refer to, which is better than gambling without any principles. However, as a trader, I must remind everyone not to follow the map blindly, and certainly not to talk about trading on paper; much knowledge is gained through practical experience.
The Market is Like a Battlefield
Finally, I will conclude with a poem by Chairman Mao:
"Reading the June 30th issue of the People's Daily, Yujian County has eliminated schistosomiasis. Thoughts surge, and I cannot sleep at night. A gentle breeze brushes, the morning sun approaches the window, gazing at the southern sky, I happily take up my pen.
Green waters and lush mountains are in vain, Hua Tuo is helpless against the small worm!
In a thousand villages, the brambles are left by people, in ten thousand households, the ghosts sing.
Sitting on the ground, the sun travels eighty thousand miles, gazing at the heavens, a thousand rivers.
The Cowherd wants to ask about the plague god, the same sorrow and joy drift away with the waves."
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