Futures investment skills

(6) . Follow the trend

① Definition of trend

In the market research method of technical analysis, the concept of trend is absolutely the core content.. The only purpose of all tools used by chart analysts, such as support and barrier levels, price patterns, moving averages, trend lines, etc., is to help us measure market trends, so as to make transactions in the direction of trends. In the market, "always follow the trend", "never reverse the trend", or "trend is a good friend", and so on, have become commonplace. Therefore, we should spend some time to define and classify trends.

Generally speaking, the trend is the direction of the market. However, in order to facilitate practical application, we need more specific definitions. Under normal circumstances, the market will not go straight in any direction. The market movement is characterized by twists and turns. Its trajectory resembles a series of successive waves, with quite obvious peaks and valleys. The so-called market trend is formed by the rising or falling directions of these peaks and troughs in turn. Whether these peaks and valleys rise or fall in turn, or extend horizontally, their directions constitute the trend of the market. Therefore, we define the rising trend as a series of successively rising peaks and valleys; The downward trend is defined as a series of descending peaks and valleys; The trend of lateral extension is defined as a series of peaks and valleys extending horizontally in turn.

② The trend has three directions

The three trends we call rising, falling and horizontal extension are well grounded. Many people are used to thinking that there are only two trends in the market, either up or down. But in fact, the market has three directions of movement - up, down and horizontal extension. In terms of conservative estimates, at least one third of the time, the price is in the form of horizontal extension, which belongs to the so-called trading range. Therefore, it is important to clarify this difference. This horizontal expansion shows that the market is in equilibrium for a period of time, that is, in the above price range, the power of the supply and demand sides has reached a relative balance. However, although we define this flat market as a horizontal extension trend, the more popular term is "no trend".

Most technical tools and systems are essentially trend oriented, and their main design intent is to follow the rising or falling market. When markets enter this flat or "no trend" stage, they usually behave poorly, or even fail to work at all. It is precisely in this period of horizontal extension of the market that trend investors are most vulnerable to setbacks, and those who use trading systems also suffer the greatest losses. As the name implies, for a trend adaptation system, there must be a trend to follow before it can perform its functions. Therefore, the root cause of failure is not the system itself, but the investors. It is the investors' operational mistakes. The system designed to work under the conditions of the trend market has been applied to the market environment without trend.

Futures investors have three choices -- buy first and sell later (long), sell first and buy later (short), or hold hands and watch. When the market is rising, it is certainly the best policy to buy first and sell later. When the market falls, the second option is the first choice. As a matter of course, when the market is extending horizontally, the third method -- holding hands and watching -- is usually the wisest.

③ . Trends have three types (scales)

Trends not only have three directions, but also can generally be divided into three types. These three types are major trends, minor trends, and temporary trends. In fact, in the market, from a very short trend covering a few minutes or hours to a very long-term trend lasting 50 or even 100 years, there are countless large and small trends coexisting and working together at any time.

④ , Trendline

The so-called trend line is the connection between two or more low points in the rising market and two or more high points in the falling market. The former is called the rising trend line, and the latter is called the falling trend line. The function of the rising trend line is to show the support level of the price rise. Once the price falls below this line in the process of fluctuation, it means that the market may reverse, from up to down; The function of the downtrend line is to show the resistance to recovery in the process of price decline. Once the price breaks through this line in the fluctuation, it means that the price may stop falling and return to rising.

Investors should pay attention to the following points when drawing trend lines:

1. The trend line can be divided into long-term trend line, medium-term trend line and short-term trend line according to the length of the price fluctuation time. The long-term trend line should select the long-term fluctuation point as the basis for drawing the line. The medium-term trend line is the connection of the medium-term fluctuation point, while the short-term trend line is recommended to use the 30 minute or 60 minute K line chart for connection.

2. When drawing trend lines, try to draw different experimental lines first. After the price changes for a period of time, keep the trend lines that have been verified to reflect the fluctuation trend and have analytical significance.

3. Correction of trend line. Take the correction of the rising trend line as an example. When the price falls below the rising trend line and quickly returns to the top of the trend line, one of the original low points should be connected with the new low point to get the corrected new rising trend line, which can more accurately reflect the price trend.

4. The trend line should not be too steep, otherwise it is easy to be broken through horizontally and lose its analytical significance. When studying and judging the trend line, we should beware of the "traps" made by the main force using the trend line. Generally speaking, before the price breaks through the trend line, the upward trend line is the support for every decline, and the downward trend line is the resistance for every price recovery. When the price breaks through the trend line, if there is a gap, the reversal trend is very likely to occur, and the price trend after the reversal has a certain degree of strength. When the price breaks through the resistance of the downward trend line and rises, it generally needs the cooperation of large trading volume. When the price breaks through the upward trend line downward, the trading volume generally does not expand, but sharply increases within a few days after the breakthrough.