Introduction to Volume and Price Analysis—Basic Patterns and Indicators Breakdown

This article is a late-night effort, packed with valuable insights. I recommend saving and screenshotting it.

After recent fluctuations in the clone markets, some people are starting to try understanding the logic behind volume and price. One core aspect of volume and price is open interest (OI), which I’ve been emphasizing.

OI is divided into two types:
1. Position quantity
2. Position value

Many beginners often confuse these two, but they are separate metrics. They influence each other but are relatively independent.

First, let me explain what position quantity is, why it’s so important in clone systems, and some simple volume-price logic.

Firstly, contract open interest mainly reflects market enthusiasm.
The composition of open interest is between longs and shorts (it’s not long positions + short positions). It measures one-way open interest.
In other words, long positions = short positions = contract open interest.

A simple example: I open a long, you open a short. At this point, OI is 1, and we are counterparties.
Every long contract has a matching short contract.
This is why futures are zero-sum: for someone to profit, someone must lose.

Next, when does contract open interest increase, decrease, or stay flat?
Let’s use a table for clarity:

| Scenario | Price Movement | OI Movement | Interpretation |
|---|---|---|---|
| 1. Continuous increase in open interest | Price up | OI up | 【Bullish strong accumulation】
| Logic: Only when buyers actively open longs and sellers actively open shorts (both adding funds) does OI rise. Price rises as a result, indicating stronger buying pressure. |
| 2. Price down | OI up | 【Bearish strong accumulation】
| Logic: Large capital inflow but price drops. This shows active shorting (selling pressure) is dominant, overpowering buying. |
| 3. Price up | OI down | 【Short covering / short squeeze】
| Logic: Price rises but open interest decreases. No new long positions are entering; the rise is due to existing shorts closing (stop-loss or take-profit). |
| 4. Price down | OI down | 【Long liquidation / long cascade】
| Logic: Price drops and open interest decreases. No new short selling; existing longs are closing positions. |

These are the most basic volume-price patterns, applicable to some clone markets. But relying solely on these basic patterns for clone trading is a bad idea—trust me, it’s certain. Volume and price are a very systematic and logical aspect of financial analysis. A clone market with millions in investment can’t lack professional financial practitioners. However, you can use these basic volume-price patterns to catch most clone setups.

Next, I’ll explain a common mistake beginners make—distinguishing between position value and position quantity.

As the names suggest, one is quantity, the other is value. But I ask you: do you really understand whether you’re looking at position value or quantity?
Answer me immediately: which one is value, which one is quantity?

The exchange shows us contract open interest as the value of open positions.
This is a volume-price trap. I’ve seen many people create alert bots, but they don’t even understand the basic difference between quantity and value.

In volume-price relationships, volume always comes first; price is secondary.
Volume and price are intertwined but can also be independent.

Position quantity truly reflects market enthusiasm.
Position value only represents the worth.

Suppose BTC is $90k per coin, with a position quantity of 100k coins, and a position value of $9 billion.
If no new players enter or leave (the market is stable), and BTC rises to $100k, then the position quantity remains 100k coins, but the position value becomes $10 billion.
If you use position price to analyze volume and price, you might see a surge in open interest and a rise in volume—main players entering. But in reality, no new players are involved; the chips just appreciate in value.
If you only look at position quantity, you’ll see it remains flat—no new players. This is a no-volume rally, which will eventually revert in value. Such a market is prone to a sharp correction.

Therefore, what we should truly care about is position quantity, not value.
This is the key indicator of real capital inflow.
Value is just an illusion of prosperity.

A simple example: recently, PIPPIN’s position value has been declining, but the position quantity has been increasing.
This indicates some market participants are playing, and quite a few are involved.
The main page shows a position value (not sure if users can manually change this data), but it can give retail traders a false sense of security.

This also relates to why you shouldn’t rely solely on patterns to trade clones.
Contracts can’t be detached from spot prices.
If the market maker controls the spot, they can influence futures prices.
I won’t go into detail here, but the relationship between spot and futures is crucial.

Next, I’ll introduce some basic patterns.
Note: these patterns are completely ineffective in heavily controlled clone markets.
Remember, this section is somewhat advanced. I recommend saving and studying basic volume-price logic first.
You should at least understand these terms before proceeding, or else it’s like singing to a blind person—your effort is wasted.
If you want to be a smart market participant, learn some fundamental volume-price concepts.

Futures are influenced by spot prices.
If the market maker can single-handedly control the spot, the above indicators will be distorted.
If the market maker (whale) controls the spot, the simple OI logic fails and can even be exploited by them to trap “technical traders.”

This is because futures liquidation mechanisms are anchored to the spot index price.
As long as the market maker can push the spot price higher, even if everyone is short in futures, they will be liquidated due to rising spot prices.

This is like a king issuing commands to his vassals.
Next, I’ll discuss how to identify these distorted patterns.

**Distorted Pattern 1: Fake Short Squeeze** — Price up + OI up (seems bullish, but is actually trap or trap for shorts)
Conventional logic: Price up + OI up = genuine bullish attack = bullish.
Market maker control (distorted):
Method: The market maker heavily manipulates the spot market (due to shallow depth).
Futures reaction: Retail traders think, “Why is this coin rising? Trash!” and aggressively short in futures.
Distorted outcome: You see OI surge, but it’s not genuine buying; it’s retail traders fighting against shorts.
Result: The market maker continues to push the spot, triggering short stop-losses or liquidations, causing futures to spiral upward.

How to spot this:
Check funding rates: If the price surges and OI rises but funding is highly negative (e.g., -0.1% or even -2%), it indicates shorts are increasing, and the rally is driven by spot manipulation.
Check spot volume: If spot buy volume (CVD) spikes vertically while futures CVD declines (retail traders shorting), it’s a sign of distortion.

**Distorted Pattern 2: Fake Break** — Price down + OI down (seems like longs surrendering, but actually absorbing)
Conventional logic: Price down + OI down = longs closing positions = market ending?
Market maker control (distorted):
Method: The market maker holds large spot holdings and deliberately dumps in the spot market to create panic.
Futures reaction: Many weak longs (especially high leverage) see the spot crash and panic sell, causing OI to drop.
Distorted outcome: OI decline isn’t because longs are leaving voluntarily; it’s because they’re scared out. The market maker then re-absorbs the chips at low prices.

How to spot this:
Check large holder positions: If OI drops and price drops, but large holder positions increase proportionally, it indicates retail traders are being shaken out, and big players are quietly accumulating.

**Distorted Pattern 3: Vampire Pattern** — Spot remains stable, futures OI fluctuates wildly (common in trash clones, especially early-stage ones, where coins are suddenly pumped and dumped)
Scenario: This is a control technique targeting low-cap coins.
Market maker controls the spot (e.g., JELLYJELLY at 90%), removing buy/sell orders or placing them very thinly.
Spot price stays almost unchanged without much cost, while the market maker manipulates futures (long and short simultaneously), inflating OI and volume to create a false sense of activity.
Distorted outcome: High OI looks liquid, but it’s all the market maker’s own orders.
Result: Once enough retail traders enter, the market maker sells a small amount of coins, causing the spot to crash instantly and wiping out futures traders.

Finally, a very important but often overlooked indicator—**Spot CVD**.
Spot is the result of futures.
If spot CVD doesn’t synchronize with futures CVD, the market is fake.
If the coin is controlled by a whale, it’s a trap to harvest retail traders.
Sometimes, prices keep rising while CVD declines—this is a manufactured pattern, as CVD records active buying.
If whales aren’t trying to trap, why fake CVD?

If the spot is heavily controlled (like in low-cap clones), blindly relying on these patterns can be disastrous.

That’s about it. Once you understand these concepts, you’ll be able to grasp the threshold of volume-price analysis.

As for how to analyze heavily controlled clone coins or manipulate their order books, that’s another set of logic I’ll keep concise here.

You can see from my past posts that I often analyze heavily controlled clones.
I don’t endorse value investing in clone systems.
Large-cap clones can be analyzed with these basic volume-price indicators, at least giving you a decent entry and exit strategy.
If you try to apply these indicators to garbage clones, just give me your money—I’ll teach you how to play with trash coins.