The market trend is distinguished according to the direction, which is mainly divided into two types: trend and shock.
From the perspective of technical charts, individuals classify the risk of price fluctuations into two types:
The first is the risk of trends; the second is the risk of shocks.
The risk of trend comes from the risk of unilateral rise or fall, and the risk of shock comes from the risk of sharp price fluctuations up and down.
The risk of shocks, due to the unclear direction, transactions in the shock range, it is easy to kill both long and short, especially the trend of violent price fluctuations.
1. Trend risk
The risk of the trend, if a trader blindly chases ups and downs, it is easy to be stopped or locked in by price corrections or reversals.
The unilateral trend, that is, the upward trend and the downward trend, the price trend that has been rising or falling is difficult to sustain, because the short-term profit-taking traders who are not firm in their short-term positions, and traders who like to search for tops and bottoms, have just been unset or cannot bear the depth Traders who are locked in will make counter-trend selling behaviors in the middle of the price fluctuations and time, that is, we see a callback or rebound in the price trend.
It can be seen from this that the risk of the trend and its release method:
1. Release through price callback
2. Release through sideways shocks
Let's take a look at the price trend of international gold, as shown in Figure (1):
figure 1)
The band AB is a unilateral rise. As the price rises, the long risk is continuously accumulated. If the price does not rebound, it will be difficult to continue and it is not conducive to the continuation of the upward trend.
When you encounter such a unilateral rise and you can’t buy it at the starting point, don’t be jealous and chase the rise to buy the rise, otherwise you will be the one who is caught. Encountering such a strong kinetic energy band rise, especially a unilateral rise at a low level, we wait for its callback to buy, that is, the fall callback of band BC is a risk release for band AB, and it is the best long position to enter the market at the end of the band BC callback Intervention point.
It is emphasized here that the magnitude of the callback is best not to exceed 50%, otherwise it is easy to form a reverse trend risk.
The rise of the band CD is stronger than that of the band AB. One of the big long positive lines, the bulls reach a climax, and the risk of saving will be greater at the same time. Here, the risk of chasing the rise is greater.
For the long-term risk of band CDs, the market releases short-term risks through high-level shocks and downward corrections.
Here we talk about the risks of unilateral trends, and release short-term risks through shocks. There are also two common situations.
One is that at the key support and resistance level, there is a large selling pressure, the main force refuses to pull back, and does not want to let others buy low-level bargaining chips or people outside the market, release the previous hold-up through high-level shocks, and wash at the same time. It is beneficial to the continuation of the trend of the market outlook to take profit from buying at low positions. See picture (2):
figure 2)
The other is at the end of the trend. The main force likes to ship goods through high sideways fluctuations. Although the risk of unilateral trend is released, the risk of reverse trend is accumulated at the same time.
Although in the high unilateral trend, it seems that the trend is very strong and the market is very attractive, but it is often short-selling or selling to a climax, which is easy to form a big top and a big bottom. Generally, it is not recommended to chase the rise and kill the fall.
Summary of personal experience, if you did not buy at the initial stage of a unilateral trend, if it rises or falls, you should not chase the high or the short, and wait for the callback or shock to release the short-term rapidly accumulated trend risk before considering entering the market. In the unilateral trend at the end of the trend, whether it is a callback or a shock, one must be very cautious and try not to participate easily.
2. The risk of shock
The risk of shock is mainly due to the disorderly fluctuation or violent fluctuation of the price within a certain range, which is a manifestation of the large divergence between long and short. At this time, both long and short positions are easy to be killed.
The risk of shocks is mainly released in two ways:
One is convergence within the interval; the other is interval breakthrough.
If the price gradually changes from a wide range of fluctuations to a narrow range of fluctuations, it is a change from a large divergence between long and short to a gradual consensus of opinions. After a narrow range of fluctuations, the range breaks, that is, it resolves the lack of formation in the range. direction risk. The more common one is the convergent triangle, see figure (3) below:
image 3)
Written at the end, whether it is trend risk or shock risk, you must consider its position and trend. Secondly, there is no absolute boundary between the two, and there is mutual conversion. The main focus of this article is not to tell you how to buy , but to tell where not to enter the market, for example: do not chase ups and downs in unilateral trends, and participate cautiously in the shock range.
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