Trend analysis technology is the core of technical analysis

2022-04-28 0 By

In the stock market, Charles dow, the originator of dow theory, and William Hamilton, his successor, were the first to define trends and establish research models. They summarized the trend of the stock market into three main trends :(1) basic trend (major trend or main trend);(2) Secondary trends (medium-term trends);(3) Small trends (daily fluctuations).They argue that market trends conform to Newton’s law of inertia, which states that “all bodies have the property of remaining in their state of motion”, and that trends remain in their original state of motion when there is no external force acting on them.Robert D. Edwards, the later master of Dow Theory, also proposed three basic principles of the stock market through in-depth research on the stock market.One of the most important is that trends, once established, tend to persist.Similarly, the view of Dow theory and its successors that trends have the character of forward continuation is also shared by many securities theorists.For example, Wilder, the creator of The Adam theory, believed that markets have a high probability of moving in a particular direction for a certain period of time.Livermore also believes that trends can’t be formed or ended in a day.The theoretical basis of trend analysis comes from Newton’s law of inertia: all objects have the property of maintaining their state of motion.According to this principle, trend theorists argue that market trends, once established, tend to continue.For example, after an uptrend is established, it will continue in the original upward direction for a period of time.Once a downtrend is established, it will generally continue in the same direction for a period of time, giving traders an opportunity to enter or exit the market.It is generally believed that at the end of a decline, when the current low is higher than the previous low and the current high is higher than the previous high, a new upward trend is likely to occur.An upward ray connecting the two lows is the upward support line for the trend.The new trend is confirmed when the price returns to support near the upsupport line from the high level, and this support is the trader’s best entry point.Similarly, at the end of an uptrend, when the current high is lower than the previous high and the current low is lower than the previous low, a new downtrend is likely to occur.A downward ray connecting the two highs is the downward pressure line for the trend.The new trend is confirmed when the price returns from its low level to near the downward pressure line and meets resistance. The pressure is the trader’s best exit point.