PSY (Psychological line) is based on the study of investors' psychological tendency, which converts the psychology and facts of investors' preference for buyers or sellers into numerical values, forming popularity indicators, and is used as a parameter for buying and selling stocks.
Chinese name
Psychological line
Foreign name
PSY，Psychological line
Role
Used to study the investment trend in a certain period
The English name of psychological line indicator isPSY indexThe commonly used method is to focus on long opportunities when the indicator is less than 25 and short opportunities when the indicator is more than 75.Less than 10 is extremely oversold, and more than 90 is extremely overbought.If the market fluctuates sideways, the index moves between 25 and 75.When encountering a wide range of market fluctuations up or down, PSY often repeatedly breaks through the 25-75 area and gives invalid signals, which causes great losses to traders who repeatedly open and stop losses.
Through actual use, it is found that the default values of the upper and lower bounds of 25-75 need to change constantly with the continuous extension of the observation period of the PSY index.In actual use, PSY indicators are more used for the secondary confirmation of MACD trend indicators than used alone.
In firm offer transactions, PSY is mostly usedreversalIndicator: short when PSY breaks the upper limit and long when PSY breaks the lower limit.Many statistical data show that PSY is only a qualitative indicator, which is used to determine whether a variable has a significant trend. It can only be used to test the results, not the process.Combined with this explanation, we find that PSY is more often used as a profit stop indicator in actual operation.[1]
effect
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Psychological line is used to study the investment trend in a certain period of time.The calculation considers the ratio between the number of days rising in a period of time and the total number of days, so the value can reflect whether the market investment tends to the buyer or the seller.
computing method
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PSY=rising days in N days/N × 100%
N is generally set as 12 days, with a maximum of 24 days and a maximum of 26 days.
For example, if there are 5 days of rise and 5 days of decline in 10 days, the psychological line is 5/10=50%. Then mark this on the percentage drawing. When the percentage continues every day, connect the daily percentage, which is the psychological line. The psychological line is better compared with the K line, so that you can better understand the overbought or oversold situation from the stock price changes.From the perspective of psychological line, before a period of rising market starts, the lowest point of oversold usually occurs twice. Therefore, investors observe the psychological line. If they find that the oversold phenomenon on a certain day is serious, there is little chance of falling below this point in the short term. When the psychological line changes upward and falls back to this point again, it is an opportunity to buy.vice versa.Therefore, there will be more than two buying points and selling points before the rise or fall of the market, so that investors have sufficient time to study and judge the direction of future stock price changes, and then make the final decision of going in and out.
Application principle
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(1) The percentage value calculated by the psychological line formula is overbought when it exceeds 75, oversold when it is below 25, and the percentage value is normally distributed in the 25-75 area.However, when the market rises, the selling point should be raised above 75;When the market falls, the buying point should be reduced to below 45.Specific values shall be based on experience and other indicators.
(2) Before a period of rising market starts, usually the low point of oversold will appear twice.Similarly, before a period of decline starts, the highest point of overbought will also appear twice.When there is a low point of oversold for the second time or a high point of overbought, it is usually the time to buy or sell.
(3) When the percentage value drops to 10 or below, it is really oversold. At this time, it is a short-term rebound opportunity, and you should buy immediately.Accordingly, when the percentage value increases to 90 or more, it is really overbought, and the stock price may fall.
(4) The psychological line mainly reflects the overbought or oversold market psychology. Therefore, when the percentage value moves up and down in the normal area, it should generally hold a wait-and-see attitude.
(5) The two high points are selling signals;Buying signal refers to two times of low point concentration.
(6) The psychological line and VR are used together to determine the short-term trading point, so as to find out the high and low points of each wave.
(7) The combination of psychological line and counterclockwise curve can improve the accuracy and clearly point out the head and bottom.
Analysis essentials
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The application of PSY indicators should be analyzed together with other technical indicators
(1) When the PSY is around 25 or lower than 25, it indicates that the seller has a strong mentality, and the stock price has reached the bottom, so investors can buy at the right time;
(2) When the PSY is around 50, it indicates that both the short and the long sides are watching, the buying and selling popularity is balanced, and investors should adapt to the opportunity;
(3) When PSY is around 75 or above 75, it indicates that the stock price has reached its peak, and investors should consider selling.
Scope of application
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Application scope of psychological thread
1. PSY can be applied to both the market and individual stocks.
2. The psychological line mainly reflects the overbought or oversold market psychology. Therefore, when the psychological line PSY moves within the normal range of 25-75, it is a wait-and-see signal. Generally, it is not appropriate to take action, and should hold a wait-and-see attitude.
3. The design parameters and conditions selected by psychological line PSY are too simple. There are only two variables, up or down, so there is no specific quantitative reflection and performance of the changes in the market.The calculation of PSY of psychological line is mainly based on the number of days of rise, and no consideration will be given to whether the stock price is flat or falling.
4. According to the value calculated by the psychological line formula, if it exceeds 75, it is overbought, and if it is below 25, it is oversold. However, when the market rises, the selling point can be raised above 75;When the market is falling, the buying point can be reduced to below 15.
5. Whether the rising market or the falling market starts, PSY usually has more than two buying or selling points, and has sufficient time and opportunity to make judgments and decisions.
6. PSY should not be used alone, but combined with other indicators.
We take China Merchants Group A as an example to explain the application of PSY indicators in actual combat.On April 25 this year, the PSY of the stock reached 16.67, which was oversold. After that, the stock rebounded, but the level of the rebound was small. On May 30, the stock fell back to 16.67 again, indicating that the buying time was reliable.Moreover, in the following trading days, although the stock price hit a new low, PSY did not fall, and there was a bottom deviation phenomenon, which verified the reliability of the bottom. After that, the stock started a strong upward trend.
Key points
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The main points of using PSY are as follows:
1. The value range of PSY index is 0-100%, with 50% as the center. The area between 25% and 75% belongs to the normal range.
2. If the PSY value exceeds 75%, it is overbought; if it is lower than 25%, it is oversold. There are more opportunities for the gold price to fall back or rise, and it can be ready to sell or buy.When PSY exceeds 90%, it is severely overbought, and it is the time to sell;Less than 10% is a serious oversold and an opportunity to buy.
3. Buying signal when the oversold low point occurs more than twice;An overbought high that occurs more than twice is a sell signal.
4. If the PSY curve has M head at high position, it is the selling opportunity;If the PSY curve has a bottom W shape at the low position, it is a buying opportunity.
5. PSY indicator deviation signal is also applicable to judging gold price trend.
The psychological line mainly studies the psychological trend of investors, and converts the psychological fact that investors tend to buy or sell in a certain period into numerical values to form popularity indicators, so as to judge the future trend of stock prices.Generally, 10 days is the short-term investment index, and 20 days is the medium-term investment index.
Value taking
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1. 0 and 100 are taken as the two limit values of PSY index respectively, and 50 is taken as a dividing point to divide the whole into two regions, half of which is the days of rising and generally falling
2. When the PSY is greater than 50, it means that many forces are dominant, and the number of days of the rising trend is greater than the number of days of the falling trend. When the PSY is less than 50, it means that the air force is dominant, and the declining trend is more than the rising trend
3. The range of PSY index between 25 and 75 is regarded as a normal fluctuation stage, which belongs to the balance zone. Investors can generally keep a wait-and-see attitude during this stage. If PSY breaks through 25 and 75, attention should be paid to the changes in the market. At this time, the short side and many parties begin to become obvious, entering the overbought and oversold zone, and the chances of the market retracement and rebound begin to increase
4. The part beyond PSY 17 and 83 is regarded as an extreme area. Generally, when PSY is less than 17, the market is very likely to rebound, and traders can buy. Conversely, if PSY is greater than 83, it can be regarded as a good time for investors to sell[2]
Tips
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1. The psychological line is better compared with the K line, so that we can better understand the overbought or oversold situation from the stock price changes.
2. The low point of oversold usually occurs twice before a period of rising market starts.Similarly, before a period of decline starts, the highest point of overbought will also appear twice.
3. The two high points are selling signals, and the two low points are buying signals.
4. Psychological line andVolume ratio(VR) can be used together to determine the short-term buying and selling points to find out the high and low points of each wave.
