Traders have to deal with prices every day, especially for technical analysis traders. Price is the most important decision-making basis in their trading system, or even the only basis: just looking at the price is enough. So what exactly is price, and how do we think about it?
The most common statement is that price is an expression of value. We acquiesce that things must have their intrinsic value, but how to evaluate this thing? How to express after evaluation? You need to use the price.
The value itself is invisible, but the price can be seen and touched. "Operation Chaos" says that every moment in the market is a "compromise on price in the face of disagreement about value," which is a nice statement.
The price given by a fair, open, and just market may not be the best value evaluation and performance method—for example, a 100,000 diamond ring may not be able to accurately measure the love of a man and a woman in love—but it is definitely the least bad .
Prices in the financial market, such as the closing price of soybean meal futures contract 1705, are closely related to, but also significantly different from, transaction prices in spot operations. I remember that a big spot boss who has been in the industry for a long time told me that the transaction price of spot is the real price. As for the futures price, a group of rogues with high IQs are using their capital advantages to mess around—you can imagine his perception of the futures market.
The futures market mirrors the pricing process. The time-sharing trend within a day can be regarded as a comprehensive reflection of all the mental activities of the negotiators. Including their rational thinking and irrational emotions. Thanks to the existence of the futures market, we can study the internal state of the market just like looking at an electrocardiogram.
Technical analysis traders have little sensitivity to "value" or even a strong affinity for the concept. For example, in the case of stocks, there is no necessary relationship between the stock price and the company's qualifications. In theory, good companies are always scarce, and scarce ones are always expensive. But it was fried. In the A-share market, there are probably countless people who have been injured because of their belief in "value investing".
Price is the product of the market and the most important symbol of the market. Therefore, to define the price, we must first define the market. What does the market mean to you?
For spot merchants, when the market is mentioned, commodities and their supply, circulation, demand, etc. immediately come to mind. Factories, warehouses, logistics, research, negotiations, contracts, payments, customer relationships, etc. come to mind. It's all very concrete. But none of this makes sense to me. This is not my market.
A market, as the name suggests, is a place where trading activities take place. The market is to traders what the world is to people. Because the world is nothing but a place where people move.
If we make a simple dualistic distinction between things and me, apart from me, everything is a thing, and the scope of me is defined, and the world outside the scope is the world. In the same way, if I get rid of me, the rest is the market.
To me, the market is the group of people who are excluded. More precisely, a market is a group of people and their activities. As for the price, it is naturally the trajectory of crowd activities.
Why do people move? In other words, why does the market change? Because the market is a highly open system, it is not closed, it absorbs information from the outside world, and also transmits information to the outside world.
In terms of absorption, it has too many dynamic sources: supply and demand balance, economic policy, political situation, climate change, and so on. The crowd is always stimulated by a large amount of information. They either have resources with advantages, or believe in a certain conclusion, or simply act because the profit and loss itself arouses biological instinct. Various actions stir each other, triggering price changes.
In terms of transmission, price changes are the strongest signals the market can give. As revealed by Soros's reflexive theory, the interaction between the inside and outside of the open system is endless, absorbing and transmitting mutual feedback, re-feedback, or reinforcement, or restriction, and the final path and result are difficult to predict. This is why fundamental analysis often fails.
As a relatively pure technical analysis trader, I respect fundamental analysis, but I will not bow down. It's like the Army respects the Air Force and is willing to coordinate battles with it, but is unwilling to join it.
Fundamental analysts always try to collect more, more accurate, and more real information, and then use the information with advanced financial models. If the actual results are not good, there is either a problem with the information collection or a problem with the model. Considering the infinite grandeur of the world, it is very difficult to collect high-quality information consistently, but what about models? Ultimately it is an abstract interpretation of the truth (the root cause), not the truth itself.
No matter how the fundamental information changes, it has no power by itself, it has no hands and feet, and it cannot buy or sell, and cannot directly drive price changes. He must first enter the human brain to make people believe. It can only have an impact on the price with the hands of a human being, and it is meaningless without a human being as an intermediary. Human activity is the direct cause of price changes. Technical analysis traders don't care about the truth (the root cause), we care about the people (the immediate cause).
Take the famous anti-gold general Yue Fei as an example. Is he a good guy? Maybe, maybe not. We thought it didn't matter whether he was right or not, the important thing was whether the emperor believed him or not. If the emperor does not believe that he is a good man, then he will not live long! Therefore, just as "Yue Fei is a good person" evaluated by the moral system cannot determine life and death, the positives evaluated by the financial model are not really positives unless the market interprets them as positives.
In any case, the activities of the crowd will definitely leave a track. Can this track reflect the value? No idea, and we don't care. But it definitely reflects the crowd's perception of value. For example, copper is now 45,000 yuan. We understand this objective fact in this way: it is not that a ton of copper is worth 45,000 yuan, but at this moment, people think that copper is worth 45,000 yuan.
We just want to make money, and money doesn't come from fundamentals, it comes from people. K-line, trading volume, moving average, and ATR are all tools for us to monitor and measure crowd activities. The so-called technical analysis is to try to grasp the psychological and behavioral characteristics of the crowd, and then create a competitive advantage against the crowd based on this - turning their money into your own.
"Swordsman" Zhonghua Mountain School has Jianzong and Qizong. Qizong pays attention to controlling the sword with qi, it's not impossible, it just takes too much effort. However, Jianzong wins directly from the moves, and "Dugu Nine Swords" is his pinnacle of swordsmanship. Its moves are all named after the word "Po", such as Po Dao, Po Gun, Po Jian and so on. Why? If you can defeat all tricks, and you are also a trick, you can defeat yourself. In this way, the state of breaking through and standing up is achieved - "Nothing can be broken without standing".
Linghu Chong never preemptively strikes, but intends to be in front of the sword, pays attention to anticipating the enemy's opportunity first, and moves at the camera. When the enemy is not moving, I just need to be ready. When the enemy moves, the loophole will come out, just to strike after the enemy. This is similar to technical analysis: lag.
We are trajectory analysts, so we have to wait for the trajectory to come out before we can make analysis and judgment. It is therefore impossible for us to get ahead of our object of analysis. In other words, we respond to the crowd, but cannot react earlier. what to do? There is only one way, and that is, to respond better.
Ordinary people's transactions basically end in failure because of poor response. As long as human nature remains unchanged, greed and fear remain unchanged, the instinct of seeking profits and avoiding disadvantages remains unchanged, and the extreme aversion to losses leads to refusal to execute stop losses; the extreme desire for profits leads to excessive risk taking. None of this will change.
In this way, there must be something we call a "trend" in the movement trajectory of the crowd. It is nothing magical, but a special type of movement trajectory: malleable in space and continuous in time. sex. Based on this, the trading system is developed, and although it lags behind, it can still make stable profits. "Tao Te Ching" has a cloud: "The body is behind the body and the body is the first, and the body is outside the body." We are willing to retreat, but we can't help but move forward. This is first class wisdom.
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