This method isn't "crypto trading law", just a widely used practice.
There is no right and wrong with this, you need to satisfy your mind so you can make successful trades. Working out what works for you is a process of asking relevant questions (which you're doing) and analysing the responses.
As I have been around BTC for a long time (trading alts less time) I use the historical data/prior knowledge to predict future movement and it has worked for me. One thing the historical data tells me for sure is that year in year out $1=$1 but BTC keeps on multiplying against the dollar. I hope this helps.