article originally from fmz.com https://blog.mathquant.com/2018/12/10/how-to-grasp-the-trend-in-investment-operation-trading.html
First, be good at identifying trends.
There is a saying called “Trend is your friend”. Finding the main line of the trend will help investors grasp the market as a whole and will not be confused by short-term market fluctuations. A graphical analysis of the weekly trend line and the monthly trend line is very suitable for identifying longer-term trends.
Second, we must recognize the support and resistance.
The support and resistance levels are points in the chart that are subject to constant downward or upward pressure. The support level is usually the lowest point in the chart (hourly, weekly or yearly), while the resistance is the highest point in the chart. When these points show a trend that can be reproduced, they are considered to be support and resistance. The best time to buy or sell is near the support or resistance that is not easily broken. However, once these points are broken, they tend to be reverse barriers. That is to say, in the uptrend, the resistance level that has been broken may become the support level for the upward trend thereafter; in the downtrend, once the support level is broken, it will turn into the resistance level.
1. In addition, the trend line is also a simple and practical tool in judging the direction of the market. A straight line connecting two consecutive lows or highs, the extension line will help investors judge the market’s running path, and the extension will also become the support line or resistance line.
A special form of trend line is the channel, which consists of two parallel trend lines. The two lines represent the corridors where the price trend is up, down or horizontal.
2. After recognizing the validity of the trend, the moving average becomes one of the important indicators in technical analysis, which reflects the average price at a particular time in a particular period.(www.fmz.com)
Of course, the moving average has its shortcomings, which are lags, so it does not necessarily serve as a sign of a trend shift. The solution to this problem is to use a shorter-period moving average instead of a longer-period moving average. For example, the 5-day moving average will reflect the recent price trend more than the 30-day moving average.
But the more common method is to compare the moving averages of different periods. A buy signal is sent when the short-term moving average up crosses the long-term moving average; likewise, the sell signal is prompted when the short-term moving average down crosses the long-term moving average.
There are three different moving averages in mathematics: simple arithmetic moving average, weighted moving average, and squared coefficient weighted average (EMA). The last of these is the preferred method because it gives more weight to the most recent data.
Third, the use of trend lines
The trend line is actually the essence of Dow Theory. After knowing most of the technical analysis, the master of technical analysis Murphy found that using the trend line and the simple moving average, MACD indicator can be operated very well. It stands to reason that as long as you master the trend line, you can make a good profit. But the problem now is that the false breakouts and the slowness of the trend have caused us to have problems in use. Let me first talk about some of my personal ways of using trend lines. The trend line has three roles.
1. Is indicative of trends. This is the most basic aspect. Almost every friend who has been in the business knows. It is the connection between the high and low points. Indicates the completion of a trend. Among them, two trend lines can form channels, triangles, wedges, horns, etc.; four trend lines can form a diamond shape.
2. It is an indication area, which can be regarded as running in one channel, but the area is mostly narrow, and the amplitude is usually between 10 and 50 points on the hourly chart, and the day chart is between 100–400 points. And often cannot break through, once it breakthrough, it will form a wave trend of market. This kind of squatting area is similar to the sharp of a box, but it can’t be simply said to be a box. This is a long and short position dispute area, usually before some important data comes out, or the holidays time. As long as the breakthrough is broken, it is the time to follow up. This can be said to be a very effective way.
3. It is indicative of a turning point. There are two kinds of turning points here, one is the turning of the trend in space, and the other is the turning in time and space.
Fourth, the six major elements of accurately determine the general trend
According to the research and analysis of economic and financial, judging the long and short trend of the stock market, and grasping its development trend, at least the following signs are available for reference:
1. According to various economic indicators and economic countermeasures signals issued by relevant government departments, analyze whether economic growth tends to decline, such as economic growth forecasts issued by relevant government departments, monthly growth rate of industrial production, unemployment rate, and various leading indicators. All important information is revealed. If the economy shows signs of recession, the stock market will lack strength support, and even if it is a so-called “funding market,” it will not be sustainable.
2. Does inflation have an upward trend?
Inflation not only causes enterprises to rise due to rising prices and wages, but also lowers the purchasing power of most low-income and fixed-income people, which indirectly affects corporate profits. Although in the early stage of inflation, enterprises have the advantages of low-cost inventory of raw materials and finished products, as well as real estate, which can guarantee profitability, and even after all, but it is very short. Once inflation worsens, the stock market will inevitably fall into a bearish trend.(www.fmz.com)
3. Does the interest rate rise sharply?
When international interest rates rise sharply, countries must be forced to adopt interest rate hikes in order to prevent a large outflow of their own funds. In the past few years, due to the US Federal Reserve’s increase of the re-discount rate of 0.5 percentage points, from the original 6.5% to 7%, the major banks in the United States immediately raised their interest rates to over 11%, so that European industrial countries are also Consider raising its re-discount rate. If European countries follow up, global interest rates are bound to climb, and it is predictable that the global economic development will be affected.
In addition, if inflation continues to rise, the government will tighten financial measures and force interest rates to rise in order to stabilize the people’s livelihood and curb financial speculation. As interest rates rise, business operating costs rise, profitability is relatively weak, and the spot is of course unfavorable. This is why the US Federal Reserve announced an increase in the rate of re-discount, Wall Street immediately fell sharply.
4. Does international crude oil price rise sharply?
So far, no more economical and efficient energy has been enough to replace the status of oil. Once oil prices rise sharply, the entire world economy is bound to be significantly affected.
At present, the international oil price, as the oil-producing countries and the non-oil-producing countries organize their oil-producing countries to gradually become more consistent, oil prices are expected to remain stable, but if the international crude oil prices rise in disorder, the situation may change, the global stock market It is bound to have a major impact, and the two Middle East oil crises are sufficient.
5. Whether labor and environmental issues are getting worse
The two major problems of labor and environmental protection have indeed entangled economic development and reduced the willingness of enterprises to invest.
6. Whether the society continues to be stable and stable
A prosperous market depends on stable ** and stable society. If the political situation is turbulent, economic development will be affected, and social order will be chaotic, it will reduce the willingness of enterprises to invest, and the market will be inevitable.
The fifth judgment trend line breakthrough
The breakthrough of the trend line has important analytical significance for the choice of buying and selling opportunities, and even the market makers of the market often take the market operation according to the change of the trend line; therefore, find out when the trend line is A breakthrough is an effective breakthrough or an ineffective breakthrough, which is crucial for investors. In fact, the situation in which the exchange rate tends to go downhill often occurs. The mistake of judgment means the mistake of market operation. The following provides some methods of judgment and market principles, but the specific situation still needs to be combined.
A detailed analysis of the market situation at the time.
The breakthrough in closing price is a real breakthrough
Technical analysts have found through research that the closing price breaks through the trend line and is an effective breakthrough and thus a signal to enter the market. Take the downward trend line, that is, the back pressure line. For example, if the market price has broken through the back pressure line, but the closing price is still lower than the back pressure line, this proves that the market did want to try the high, but the buying is not continued, and the market is flooding. So that the exchange rate finally fell back at the close of the market. Such a breakthrough, experts believe that it is not an effective breakthrough, that is to say, the counter-pressure line is still effective, and the market’s weak trend is still a final change.
In the same way, the breakthrough of the rising trend line should be based on whether the closing price falls below the trend line. This is often the case in chart records: after the trend line breaks, the exchange rate returns to its original position. This situation is not effective. The opposite is often the market’s trap.
Judging the principle of breakthrough
In order to avoid mistakes in entering the market, technical analysis experts have summarized several principles for judging true and false breakthroughs:
1. After discovering the breakthrough, observe more than one day.
If the exchange rate continues to develop in the direction of the breakthrough for two consecutive days after the breakthrough, such a breakthrough is an effective breakthrough, and it is a safe time to enter the market. Of course, only two days later, the exchange rate has changed a lot: the exchange rate of the purchase is high; the exchange rate of the exchange is low, but even then, because the direction is clear, the trend has been fixed, investors will still have a lot to do, It is much better to rush into the market.
2. Pay attention to the high and low prices two days after the breakthrough
If the closing price of a certain day breaks through the downward trend line (resistance line), the next day, if the trading price can cross his highest price, it means that there is a large number of buying follow-up after breaking the resistance line. On the contrary, when the exchange rate moves downwards in the upward trend line, if the next day’s trading is carried out below its lowest price, then after breaking the support line, the selling pressure is very high and it is worth following the sale.
article originally from fmz.com https://blog.mathquant.com/2018/12/10/how-to-grasp-the-trend-in-investment-operation-trading.html
Topic: How to grasp the trend in investment operation trading? (Read 130 times)
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