Before we talk about the principle of wave theory, we now understand the wave theory. Wave theory It is a tool for price trend analysis, which analyzes and predicts the future trend of prices according to the fluctuation law of periodic cycles. Under the wave theory, the market, like the waves of the sea, fluctuates rhythmically and regularly, allowing investors to feel the implied rhythm and coordination, and accurately grasp the market.
The inventor of the wave theory was Eliot (1871-1948) of the United States. He vividly described the rise and fall of the stock market as waves of the sea, driving the waves up and down. If we can grasp the rise and fall of the stock market, we can follow the trend.
Three principles of wave theory
As far as wave theory is concerned, it mainly includes three principles, namely, modified wave depth principle Fibonacci principle and alternation principle 。
1. Principle of modified wave depth
The principle of correction wave depth is used to measure the receding amplitude of correction wave. Usually, the correction wave will reach the low point of Level 1 4 wave. In a strong market, only new highs are not new lows. At this time, the four wave low of the first level will be a good resistance level, and investors can follow up to stop losses.
2. Fibonacci principle
Fibonacci principle, that is, the fluctuation ratio presents Fibonacci series. For example, three waves are 1.618 and 2.618 of one wave; The second wave callback is 0.382, 0.5, 0.618 of the first wave; The 4-wave callback is 0.382 and 0.5 of the 3-wave callback; 5 waves is 0.618 of 1 wave to 3 waves, which also explains this principle in time. There are three reasons for this ratio, as shown in the figure below.
3. Principle of alternation
The alternating principle is simple and complex, rising and falling, pushing and adjusting, and regular and irregular. The modified waveform shows alternation, as shown in the following figure. The improvement and adjustment of the principle of alternation are mainly reflected in the following three aspects.
(1) Small adjustment and small push. Therefore, if there is a small adjustment in front of us, we should do a good job in the operation plan of small promotion.
(2) Medium adjustment also means medium promotion. Therefore, if it is an immediate intermediate adjustment, we must do a good job in the operation plan of intermediate promotion.
(3) The big adjustment is the impetus for accumulating a wave of big quotations. Therefore, if there is a large-scale adjustment in the immediate future, it is necessary to formulate a large promotion operation plan.
The wave theory principle derived from the actual situation of China's stock market is as follows:
1. Upward wave generally consists of five wave types. The first wave is the starting wave; The second wave is the first adjustment wave; The third wave is the development wave; The fourth wave is the readjustment wave; The fifth wave is high surf.
2. The downward trend wave generally consists of three waves. Wave a is the shipping wave; Wave b is a rebound shipment wave; Wave C is the bottoming wave of shipment.
3. Observation from the wave pattern composition: All the five waves have an upward trend and all the three waves have a downward trend, forming a complete picture of the rise and fall of the stock market.
4. Observation on the nature and time of wave mode operation:
The first wave: It is generally believed that it is the exploratory action of the main force to launch the market. The wave pattern is gentle and the duration is short, giving the illusion of short-term market.
The second wave: through short-term suppression, the main purpose is to knock out most investors' positions, so that they can go into battle light. However, as the main force cannot lose a lot of cheap chips, the suppression time is relatively short. Generally speaking, the bottom of the second wave will not fall through the bottom of the first wave, and it usually stops at 38.2% or 61.8% of the first wave.
The third wave: On the basis of locking the chips, the main force uses some favorable factors to officially launch the market and fully attract the funds entering the market to mobilize popularity. Generally speaking, the slope of the third wave increases by at least 45 degrees, with the longest duration, which is longer than the first wave and the fifth wave. The peak of the third wave will break through the peak of the first wave, and its wavelength is 1.618 times or even 2.618 times of the first wave.
The fourth wave: after the third wave ran for a long time, the main force began to throw some chips, and the stock market began. Generally speaking, the bottom of the fourth wave will not fall below the top of the first wave, and the decline is 38.2% or 61.8% of the third wave. This reflects the adjustment of the fourth wave. The fourth wave lasted longer than the second wave, further luring funds out.
The fifth wave: the main force makes the final sprint with all strength, and treats the bad policy as a joke. Generally speaking, the stock index reached a new high in the fifth wave, its peak broke through the third wave, and the slope of the peak increased significantly. At the same time, the main force began to throw a lot of chips, unwilling to stay in the stock market for a long time. Therefore, the intensity of the fifth wave is much higher than that of the third wave, but its duration is shorter than that of the third wave, and the risk of the stock market is significantly increased.
A wave: this is the stage for the main shipment. With the realization of the main goal, chips began to be thrown out in large numbers. The main force was determined not to give any chance to those who ran away, so the stock market fell sharply. However, due to the fierce competition between long and short positions, the decline time is relatively short.
Wave b: this is the stage when the main force makes use of the rebound again to ship. The reasons are as follows: First, the stock market is bound to rebound because of the sharp decline. Secondly, the main force is shipment, and it will try to regroup. In addition, it is the funds and those investors who are lucky in the outfield who wrongly judge that the decline of the stock market has ended, thus blindly building positions leading to a rebound. It is the last part of short-term customers' market speculation that has brought a rebound to the funds. After all, it is a rebound wave, so wave B will not last too long. Generally speaking, the rebound height of wave B is 38.2%, 50% or 61.8% of wave a.
C wave: This is the stage when the main force is completely shipping. If the shipping is not clean in the rebound of main wave B, then use this stage to continue shipping as shipping. The main force is determined. Short term tourists will no longer enter the market, and the funds for cutting meat and stopping losses will continue to flow. Any favorable policy will not help. So the stock market fell into a slow downward trend, and there was almost no decent rebound in this wave of C. The duration is quite long. In the long process of decline, the bottom of the stock market also slowly formed, and the main force began to slowly collect cheap chips, gradually build positions, and make long-term preparations for launching the next round of market.
Gann Theory and Wave Theory As two of the three major technical analysis theories of the stock market, they are often used for comparison. In fact, the two can be used together. Winner Gann Wealth Network specializes in Gann theory and has special practical tools.
