Introduction to Stock Trend Theory

Trend theory is the idea that once a market has formed a downward (or upward) trend, it will run in a downward (or upward) direction. Here is a detailed explanation of how trend theory is applied.

First, the trend line

1, the so-called trend line, is based on the trend of up and down changes in stock prices drawn line, the purpose of drawing trend lines, that is, according to its veins to find the appropriate selling and buying points. Trend line can be divided into upward trend line, downward trend line and horizontal finishing trend line.

2, the stock price in the rising market, in addition to connecting the stock price fluctuations in the low point of a straight line, should also be connected to the stock price fluctuations in the high point of a straight line, so the stock price will be up and down in these two straight lines, which is the uptrend track. Stock prices in the downtrend market, in addition to connecting the price fluctuations of the high point to draw a straight line, but also in the price fluctuations of the low point to draw a straight line, the stock price fluctuations in these two straight lines up and down, which is the downtrend track. The stock price in the horizontal finishing can form a horizontal box trend line.

Two, the use of the trend track to decide to buy and sell points

1, either in the upward or downward trend track, when the stock price touches the upper pressure line, is the time to sell; when the stock price touches the lower support line, is the time to buy.

2, if in the uptrend track, found that the stock price breaks above the pressure line, proving that a new uptrend line is about to arise.

3, Similarly, if in a downtrend, found that the stock price breaks below the support line, may be a new downtrend track is about to produce.

4, the stock price in the uptrend, a wave of the peak will be higher than the previous peak, a wave of the trough will be higher than the previous trough; and in the downtrend, a wave of the peak is lower than the previous peak, a wave of the trough will be lower than the previous trough.

5, in the uptrend track, if you find that the stock price can not touch the pressure line above, that is, the trend tends to weaken.

Three, several trend analysis

1, uptrend analysis

Stock price uptrend line refers to the upward wave of stock prices, the bottom of the stock price of the connecting line, which connects to the uptrend line is usually quite regular, in the uptrend line of the price fluctuations of the stock price of the uptrend line to draw a line parallel to the uptrend line, this parallel line is also known as the return line.

Buying and selling points

(1) In an uptrend, when the stock price falls and touches the uptrend line, it is an excellent buying point (buy signal), and the investor can buy the stock.

(2) When the stock price rises and touches the return line of the uptrend line, it is an excellent selling point (sell signal), and investors can sell their holdings.

(3) the uptrend wave analysis that: the rise in three waves, each wave rising amplitude are the same, the inputs can be equal to the amplitude of the measurement, for example, the first wave of $ 45 rose to $ 60, pulled back to $ 50, the second wave of $ 50 rose to $ 65, pulled back to $ 55, and the third wave can rise to $ 65 or so.

Quotation analysis

A long market is mainly composed of primary, secondary or short-term upward fluctuations, the stock price higher than a wave, every two bottom lows can be connected to an upward trend line. Generally speaking, the primary uptrend line is smoother and lasts longer, while the secondary or short-term uptrend line is steeper and sometimes lasts a shorter period of time.

(1) the original uptrend line: the original uptrend line of the general long market is often established after a long time (as short as 2012 up to four or five years) fluctuations, and its rising angle of elevation is small, about 30 ° ~ 45 °.

(2) short-term uptrend line: refers to the long market of the secondary rolling to the bottom of the wave of the low point of the base point of the extension upward, which experienced a shorter period of time, generally a few days or a few weeks. Its upward angle of elevation is steeper, about 45 ° ~ 60 °, and sometimes even in the 60 degree angle above (especially in the early stage of the long market is most likely to occur).

(3) the uptrend line of support and pressure: in the uptrend in the stock price, encountered in the past dense trading area or other resistance, at a certain price level, selling pressure is large enough to prevent the stock price rise, or the implementation of the uptrend of the stock price reversal down, this situation is the stock is pressure.

2, finishing trend analysis

Rectangular finishing in the stock market is also known as box finishing. Stock prices move up and down in a price range, moving track defined by two parallel lines parallel to the horizontal axis, the shape of which is like a geometric rectangle or rectangle.

The box consolidation pattern usually appears in the stock price uptrend or downtrend in the early or middle, if the box appears in the stock price uptrend or downtrend at the end of the trend, often forming a reversal pattern, rather than consolidation pattern.

(1) The box consolidation pattern generally appears after the completion of the upward or downward price wave.

(2) Volume with the completion of the box consolidation, initially large and gradually shrinking, until the stock price breaks through the box consolidation.

(3) The stock must break out in the intended direction within three to four weeks at the latest.

Upward breakout at the beginning of the box shift upward; downward breakout of the box shift downward, except for the sharp rise and fall of the situation. If it does not meet the above characteristics, the box may fail and become a box reversal.

3, downtrend analysis

(1) the formation of the downtrend line: a short market is made up of the original, secondary or short-term downward fluctuations, the stock price of a wave than a wave of low, every two rebound highs can be connected to a downtrend line, in general, the original downtrend line is more gently, the experience of a long period of time, while the secondary or short-term downtrend line is more steep, the experience of a very short period of time sometimes. time is sometimes very short.

The original downtrend line: the original downtrend line of a short market is shorter than the original uptrend line, about one to two years, and the angle of its decline is more gentle about 30 ° ~ 45 °.

The flaws of trend theory

One, the main goal of trend theory is to explore the basic trend of the stock market (PrimaryTrend). Once the primary trend is established, trend theory assumes that this trend will continue all the way until the trend is destroyed by external factors and changed. It is like Newton's law in physics that all objects move in a straight line unless additional factors force them to do so. One thing to note, however, is that trend theory only infers a general trend in the stock market, but does not drive the extent to which the trend will rise or fall.

Second, the trend theory every time the two indexes to confirm each other, this has been half a beat slower, missing the best opportunity to enter and exit.

Three, trend theory does not help to select stocks.

Four, trend theory focuses on long-term trend, the medium-term trend, especially in the condition of not knowing whether the bull or bear, can not bring the inputs clear revelation.