Major tools and theories for technical analysis

First of all, we use the most is also the most basic tool the candlestick chart analysis. We look at the stock trend every day as the candlestick chart, candlestick is the most basic analysis tool, including daily, weekly, monthly, and other cycles. The candlestick originated in Japan and was invented in the Tokugawa shogunate's time. Originally used by Japanese merchants to record the price fluctuation of rice, it was gradually applied in the stock and futures markets and is used heavily in Asia. The Japanese candlestick chart records the opening price, closing price, highest price, and lowest price of a stock that day. A series of candlestick charts can be obtained by arranging the candlestick charts of different periods. Different candlesticks have different guiding meanings. A single candlestick, such as the green bar with a bald head, indicates that the price should be strongly bullish; a cross star shape candlestick indicates the balance of power between long and short. Several bars join together to form a string combination, and these different combinations have different price signals.

The second is that of morphological analysis. If a series of candlesticks (such as a week or a month) are grouped to form various shapes or shapes, it is to be analyzed. The combination of different shapes of candlesticks will have different operating significance. For example, a wedge has a price reversal signal and a triangle has a price correction signal. Usually often heard head and shoulders bottom, double bottom, round bottom, and so on, are the methods of morphological analysis, and each form has its operating significance. Technical analysis originated in the West, where line charts were used, unlike the popular Asian candlesticks.

Third, the tangent analysis. The research technique of tangent school is to draw a straight line on the stock price candlestick chart according to certain methods and principles. By observing the crossing of the candlestick and straight line, we can predict the future trend of price. For example, if several highs or lows are nearly split in the same line, then this line may be called a trend line or a support line, and every time a stock price hits this trend line, it is a signal to buy or sell. Personally, trendlines are very useful. In addition to the trend line, there are also well-known tangent lines such as the channel line, pressure support line, angle line, kamikaze line, and golden section line.

Fourthly, index analysis, also known as a technical index, mainly uses conventional trading data such as opening price, closing price, and trading volume, and establishes a mathematical model to calculate the index value of stock price in certain aspects and to predict the future trend of stock price. For example, if you are driving, you need to constantly look at your dashboard if you see that you are driving at a speed of 130 kph if you remind yourself whether I am going to slow down, or if I driving too fast. Then let's have a look at the oil consumption of the car. I'm out of oil. Do I need to put on the gas? There is also an indicator in our stock market called RSI, which is very similar to the automobile dashboard. For example, the RSI indicator can reflect the market strength, and the trading volume is equivalent to the automobile oil consumption indicator, which can reflect the market energy. If the RSI is greater than 70, it means that the market is very strong; if the RSI is lower than 30, it means that the market is very weak; if the RSI indicator reaches 100, it is reminding the stock price to rise too much and reminding to consider taking a profit. Any technical indicator is a characteristically hysteretic response to current or past market movements. For example, the Bollinger Bands Channel indicator (BOLL) reflects the market trend and direction; RSI and KDJs reflect the market rise and fall; CR, OBV, and CYF reflect the market momentum and energy indicators. These indicators are the dashboard, which tells you whether a car is fast or slow, with or without power. Without looking at indicators, we can detect the temperature and sentiment of the market by feeling, but it is easy to produce errors. Indicators can objectively reflect the current and past market conditions. This is its value.

Fifth is the moving average system. The moving average index, also known as the moving average index, is the index obtained by linking the average closing price of a certain period. The essence of the average line is to reflect the overall market cost of holding positions in the past period, which is an important indicator of support and resistance. Moving average and trading volume is the most commonly used, most basic, and most important technical indicators A break above or below the moving average (MA) is an important marker for the formation and termination of a trend. For example, for the short-term, you can refer to the 5-day or 10-day moving average (SMA), which can be sold if it falls below the SMA; for the medium-term, you can refer to the two-day moving average (SMA), which can be bought above and sold below the SMA; for the long-term, you can refer to the 60-day SMA; and for the longer term, there is the 250-day SMA, also known as the annual average, which is also known as the bull-bear boundary,

Sixth, the Dow Theory. Can be said to be the originator of technical analysis. It is also the oldest and the most famous analysis method. It was initiated by American financial journalist Charles H. Dow. After continuous summarization, supplementation, and improvement, we generally call Dow theory the result of joint research by Charles Dow, Hamilton, and Rea. We now hear nearly daily on newscasts about the Jones index, the Dow Jones index of the American stock market that is compiled by Charles Dow. After Charles Dow died in 1902, Wall Street Journal reporters formalized the Dow Theory by editing his views and articles into a book called "Preliminary Speculation." The Dow Theory is old, 100 years old, but speculating on the market some things are immutable. Because human nature has not changed, and the characteristics of the market, the root cause is still human nature. Dow Theory has many fixed rates and assumptions but also has many disadvantages, which we will describe in more detail later.

Seventh is the wave theory. It has its origins in a 1978 monograph by American Charles Collins called 'The Wave Theory', This book came to be known as the Eliot Wave Theory because the search for its origins was led by Lovell Eliot in 1930, Eliot was an accountant who became seriously ill and was placed in a sanatorium facing the ocean, He saw the waves of the ocean breaking Suddenly feel that the trend of the stock market is also like a wave of ups and downs? So he combined the movement of waves and the stock market, which was his inspiration, and then he combined the popular Dow theory, and continued to study it until his deathbed when in 1946 he published his masterpiece of wave theory, "Natural Laws: The Mysteries of the Universe." Wave theory, by definition, is a complete cycle of wavy stock prices. According to Eliot, there are five waves going up and three waves going down, making a total of eight waves. The five rising waves are called impulse waves, and the three falling waves are called correction waves. We also call them ABC waves. If you can figure out where our stock is right now, you can predict where the stock will go in the future. If you count, for example, that the stock is already at the top of the fifth wave, there's no doubt you should sell, because there are three waves of correction coming soon. This is the advantage of wave theory compared with other technical analysis. It can predict in advance, and the hysteresis of other technical analysis is relatively serious. It can only be confirmed formally after the trend is established. This is the advantage of wave theory. Of course, there are disadvantages. First of all, it is more difficult to understand and more difficult to learn. It is generally accepted that the most difficult to master technical analysis methods. This wave is differentiated. There are impulse waves, correction waves, and even more complex wave structures. It is difficult to make clear how large waves play small waves. Moreover, there are principles for counting waves. The three most important principles are form, ratio, and time. Second, there are too many changes in the waves. There are very few people who can count the waves. We all say that there are 1000 ways to count waves with 1000 people. Does this still make sense? The clearest time to count a wave is when it is complete, and often when it is complete. But it's all gone. Is it still operationally meaningful? Of course, there is. We'll talk about it later in the chapter.

Eighth, the Gann theory was created by William Delbert Gann, He is a master of technical analysis of the practical school, He has developed his own unique set of trading rules and methods of market measurement from his many years of trading practice of stocks and futures through the comprehensive application of astronomy, mathematics, geometry, psychology, and religion. And he has achieved unprecedented success, Gann's theory has very high accuracy, but also has many mysteries. He was able to link the stock market with astronomy, mathematics, religion, etc., which is beyond the reach of most people. For the average investor, it is worth learning. Gann's theory has two parts, market forecasting system, and operating principles. The forecasting system is the Gann angle line and the wheel-in-wheel that we are familiar with. The operating system is the Gann 21 trading rules that we are familiar with. Many people respect Gann because his market forecast is very accurate, but we still have to remind everyone not to go astray. No matter how accurate the forecast is, in practice, we still have to strictly abide by the operating discipline. This is his 21 trading rules.