There is only one certainty in the entire transaction, and that is the "trend". The trend has a size, but it will definitely appear. This is the root of trading profit.
All trading work is to capture trends. The price will continue. All trading modes are based on the premise of trend, and then talk about probability.
Liwumore said something similar, "To trade is to wait for the inevitable rise and fall."
Trend lines and turning point lines are the most effective tools for determining trends in our trend trading method. The way to determine the trend is that we use the trend line and the inflection point line to exclude the upward trend or the downward trend to determine the direction of buying and selling.
1. Eliminate downtrends
We can use the break of the downtrend line and the inflection point line to rule out the downtrend. When the price breaks through the downtrend line drawn in our definition and breaks through the inflection point line at the same time, we assume that the previous downtrend has ended, and the future market will enter an uptrend or sideways consolidation. Remember: sometimes the price breaks through the inflection point line first and then the trend line; sometimes the price breaks through the trend line first and then the inflection point line.
First, find the inflection point line and the downward trend line according to the definition of the inflection point line and the downward trend line (Figure 1). Through observation, we find that the price has broken through the downward trend line and the inflection point line. According to the hypothesis of the trend trading method, we can be sure that the previous downtrend has ended, and an uptrend or horizontal consolidation will be launched in the future.
The trading plan will adopt the trading principle of bargain hunting. The lowest point B will be our future stop loss point, that is to say, from the time when the price breaks through the downtrend line, any callback, as long as the price falls within our set Set the range of stop loss for each transaction, and any downturn in the market will be our best opportunity to enter the market; as long as the price falls below the stop loss line drawn by point B, we will stop the loss in time and accept the loss.
How to judge whether the future is an upward trend or a horizontal consolidation?
At this point, we need to analyze the trend before the price breaks through the inflection point line and the downward trend line, and find the last correction wave before the inflection point line and the downward trend line in the downward process, and the highest point of the last correction wave (Figure 2 The demarcation point A) will become an important basis for us to judge whether the future is an upward trend or a horizontal order.
If the price breaks through the inflection point line and the downtrend line, and then rises above the demarcation point A, we believe that an uptrend will start in the future. As shown in Figure 2 below.
If the price breaks through the inflection point line and the downtrend line, but cannot break the demarcation point A, we believe that a horizontal consolidation trend will begin in the future. As shown in Figure 3 below.
Break the trend line first, then break the inflection point line:
First, find the inflection point line and the downtrend line according to the definition of the inflection point line and the downtrend line (Figure 9). Through observation, we find that the price first broke through the downtrend line. At this time, it is not certain that the previous downtrend has ended because of the inflection point line. Outside the downtrend line, the price must break through the inflection point line again before we can be sure that the previous downtrend has ended, and the uptrend or horizontal consolidation will begin in the future.
The trading plan adopts the trading principle of buying on dips. The lowest point B will be our future stop loss point. That is to say, from the time when the price breaks through the downward trend line, as long as the price falls below the stop loss line drawn by point B, We will stop the loss claim in time; as long as the price does not fall below the stop loss line drawn by point B, any downturn in the market will be an opportunity for us to enter the market.