On the board, K-lines represent price, and the K-line faithfully records price fluctuations in this stable and orderly manner using four prices (opening price, closing price, highest price, lowest price), without any distortion or alteration. Other indicators evolve from K-lines and deviate to varying degrees from the essence of trading: making a profit from price differences.
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K-lines are also divided into different periods (weekly, daily, hourly, minute, etc.), while neglecting the price changes from the opening price to the closing price, only recording the highest and lowest prices during the period. Its philosophical meaning is also very clear: starting from the opening price, regardless of whether there are waves or calm in between, real traders remain unmoved; the closing price is the final price level at which all participants vote with their money.
Dow Theory also emphasizes looking at closing prices, as prices are dissolving all information every moment.
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The average price, commonly referred to as the "moving average," represents the "average cost" of all participants. When the K-line is above the moving average, it indicates that this variety is relatively popular, with a higher probability of rising; when the K-line is below the moving average, it indicates that this variety is relatively unpopular, with a higher probability of falling.
You might wonder, with so many moving averages, which one should we use as a standard? In fact, any of them works and conforms to this rule.
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To operate more smoothly, it is better to choose a slightly larger moving average, such as the 150-day moving average. With periods including daily, weekly, and hourly, which period should we use as a standard? To operate more smoothly, it is recommended to choose a slightly larger period, such as a 1-hour period or a 30-minute period. Beginners are best advised to choose a period of no less than 15 minutes because while smaller periods may yield quick profits, they are harder to manage. If not handled well, experiencing several large ups and downs can lead to significant setbacks.