Under China's existing stock market system, only in a bull market can stockholders have a higher possibility of making profits; therefore, when the bull market comes, one must follow the trend.
This is not only the case in the stock market, in fact, in any financial market, we must also trade with the trend, so that our trading will have a higher winning rate and bring more profits.
However, when we talk about trading with the trend, which trend should we follow?
For example, two traders are exchanging views on a certain product. One says that the current market is rising and should adopt a strategy of long bargain hunting;
Why do they give completely opposite strategies for the same breed?
It is possible that they are not talking about the same cycle. The former one is talking about the upward trend of the weekly cycle. When the pullback reaches a suitable position, one should enter the market and do long; while the latter one is talking about the 4H cycle decline, which should rebound to a suitable position. It should be short.
It can be seen that when we talk about the trend, we must first give the time frame, that is, the cycle, to measure and distinguish the trend within the range of the cycle; and if we talk about the trend out of the cycle, it is tantamount to seeking fish from a tree.
We also know that the trend of a large cycle is relatively stable. Once a trend of a large cycle is formed, it will last for a relatively long period of time, and due to the inertia of the trend itself, the trend turns around slowly.
The development of small-cycle trends is often restricted by large cycles, and false signals are prone to appear; however, any trend change or reversal must first start with a small cycle, and only when the small cycle reverses first, will it evolve Inversion into a big cycle.
This problem arises, we often encounter large and small cycle trends do not match, large cycles are bullish, and small cycles are bearish, so how to operate? Or, if the big cycle is bearish, and the small cycle is long?
To fix this, you need to do three things first.
First of all, you need to have the following two abilities.
1. Have the ability to judge trends
In a given time period, you must be able to judge what trend the current product belongs to, is it an upward trend? downtrend? Or sideways? This requires you to have methods or tools to measure trends, such as trend lines, moving averages, Dow Theory, and so on.
Second, we must have the ability to judge the reversal point (top and bottom)
No matter what the trend is, it is impossible to continue forever. It always rises and falls, and falls and rises again. Therefore, you must also have the ability to judge the reversal point (top and bottom), that is, when the trend develops to a certain extent, you must have a method or tool to judge that the trend is about to reverse, such as some more classic reversal patterns (W Top-bottom, triple top-bottom, head-shoulders top-bottom), reaction force line, golden section line, etc.
With these two abilities, you can better distinguish whether the trend is sustainable or not.
However, there is also a certain degree of conflict between these two abilities. As long as you practice more and accumulate experience, you will be able to make correct judgments in most cases.
Then, you need to select the period of trading operations.
No matter what trading method, when it is adopted by you, it will inevitably go through a period of running-in with your own personality, and then it will produce the most suitable operation cycle for you. Once you have discovered this operating cycle yourself, you must fix it and let the trading method play the most effective role in you.
Otherwise, what you are trading today is the 15M market, tomorrow is 1H, and the day after tomorrow is 4H market, so your entry and exit cycles are easy to confuse each other and cause confusion, which will affect your trading performance.
Therefore, you should roughly fix the cycle of trading operations, so as to form relatively clearer and more organized trading rules, which will bring better trading results.
Finally, you need to straighten out the relationship between the various cycles.
Let's divide the large and small periods first, and call the period of your trading operation a small period, the one that is one period larger is called a medium period, the one that is two periods larger is called a large period, and the period that is one period smaller than the operation period is called a larger period. small cycle.
So what is the relationship between them? How to straighten it out?
The following is my summary based on years of actual combat experience, you can refer to it:
The large period is used to judge the trend and reversal point, the medium period is used for trading guidance, the small period is used to select the entry position, and occasionally refer to the K-line strength of the smaller period.
1. Large cycles are used to judge trends and reversal points
Since we all know that the large cycle is relatively stable, when you select the cycle of trading operations, choose the trend of the large cycle as a strategic trend judgment, you can observe the market from a more macro perspective, and thus have a greater impact on your transactions. positive effect.
Then why not use a larger cycle as a strategic judgment? Because if a larger cycle is used as a strategic judgment, although the trend will be more stable, at the same time, the correlation between this cycle and the cycle you operate will weaken, and the effect will not be very good. For example, killing a chicken with a ox knife is not as good as a kitchen knife.
Second, the medium cycle is used as trading guidance
After you judge the trend of the large cycle, you can guide the next transaction in the medium cycle, find out the support level and resistance level by combining the "potential and position", divide the space for the market, and then use this space as an operation Strive for profit space. If the space is small, it means that there is no profit, so wait and see; if the space is large, the profit is huge, and you can participate.
3. Select the entry position in a small cycle
The middle cycle is used as a guide, and after dividing the space for the market, you can operate on a more microscopic and finer small cycle to find entry positions and stop loss positions, and then estimate the profit-loss ratio. If the profit-loss ratio is not appropriate, give up; profit-loss If it is more appropriate, further formulate a trading plan, and when the opportunity to enter the market appears, you can combine the "state" to execute the trading plan.
Fourth, occasionally refer to the K-line strength of a smaller period
Generally speaking, the smaller period under the small period is not very effective, but when the entry and exit positions appear, it can be used to observe the more microscopic K-line power, so that we can trade at a more appropriate time. In and out.
After doing these three things well, let us go back to the previous question, what should we do when the trends of the large and small periods do not match ?
In fact, the answer has almost been given above, which is what we often say, look at the big and look at the small.
First of all, focus on the trend of the big cycle, first judge what is the trend of the big cycle now? And judge whether the current trend is sustainable? Or is it near the reversal point, about to reverse?
1. If the trend of the large cycle is sustainable, if the small cycle does not match it, it must be a callback or rebound.
At this time, as long as you wait patiently for the market callback or rebound to be in place, there will often be a small-cycle top-bottom pattern when it is in place, and then enter the market in the direction of the large-cycle trend.
Or if you like to do pullbacks or market rebounds, you can enter the market in a small period, just remember to reduce the position a little, and if there is something wrong, you must make a quick decision and exit the market quickly.
2. If the big cycle is near the reversal point, and it is judged that it is about to reverse, then the small cycle does not match it. It may start with the reversal of the small cycle and gradually evolve into a reversal of the large cycle.
At this time, we can enter the layout to reverse the trend, and gradually increase our positions when the small cycle trend meets expectations, so as to maximize our profits.
Of course, very often the layout will not be so smooth, or the market will continue the previous trend. This requires you to use the tools you use to measure the trend to measure whether the small-cycle reversal trend is sustainable. Just go out and wait for the next opportunity.
— final words —
It is not an easy process to combine large and small cycles, but only by combining large and small cycles can your trading level evolve and leap forward!
This is also a process that an excellent trader must go through. As long as you observe more, think more, and temper more, you will be able to grasp it well in time. At that time, you will have a feeling of being reborn, and the bullishness will inevitably come!
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