This article is a systematic sharing of K-line combination patterns + corresponding entry and exit logic. It is highly recommended to save it!!!
The entire thread solves: how to identify patterns, how to enter the market, how to stop losses, how to set goals, a complete analysis framework, and some core logic for building this system.
This is also the course that has the greatest impact on my learning of technical analysis!!!
🗝️Subtitle navigation
Entry丨Top and bottom retracement theory
Stop loss丨Starting point theory
Goal-Constraint Theory
Concept丨Obedience Theory
Overall analysis framework (the analysis framework can be used as a daily analysis of the market)
Before knowing how to enter the market, we need to identify some basic K-line top and bottom patterns🔻
1. Top
(1) “M” top: A<=C; C>=A; E<A; E<C; BD does not matter
(2) “Inverted V” top: A>E
(3) “Inverted U” (arc) top: A>E
(4) Point A is the first counter-trend point or relative low point
(5) Point C is the only high point (V-shaped) or counter-trend point (M-shaped)
(6) Point E is the point where the price falls below point A.
2. Bottom
(1) W bottom: A>=C; C<=A; E>A; E>C; BD does not matter
(2) V-shaped bottom: A<E
(3) U (arc top) bottom: A<E
(4) Point A is the starting point, i.e. the first counter-trend point
(5) Point C will be the second counter-trend point or the lowest point
(6) Point E is the closest point to break through point A
3. The key to establishing the top and bottom lies in the number of highs or lows rather than the number of K-lines
4. The top and bottom patterns can only be confirmed when the market falls back to the M neckline for the first time
5. The arc shape takes a long time to form, the upper and lower shadows are dense, and the number of K-lines is large.
-How to enter the market through a pullback🔻
1. When the current price is at the high point of point E, the top and bottom pattern is established.
2. If the stock continues to rise after reaching the high point, it cannot be chased (the bottom has not been confirmed) because the market trend is not sustained and the increase is not high.
3. When the market falls back to the neckline (point M) again, confirm the pattern and enter the market
4. The price can also be used as an entry point if it falls back to the shadow line C. You can enter the market by splitting the position first and wait for the neckline to follow to avoid missing the market.
5. The confirmed top can be used as an entry point
6. Place the stop loss point at the market (trend) starting point or starting point
The ABCD points of the specific pattern are marked out, and you can save them by yourself. The most important thing is to draw them on the board yourself to deepen your impression!!!
This article is a sharing of my own notes of practice + theory. Some parts may be recorded briefly because I thought I already had a certain foundation at the time. If you have any questions, please feel free to communicate. 👀
How to stop loss丨Starting point theory🔻
- Starting point positioning
(1) Q point is the starting point
(2) The starting point of a rise or fall is the stop loss point
(3) It is the first point to confirm the bottom or top pattern.
(4) Usually below or above the neckline of the pattern
-Start point capture (embedded form)
(1) A large form may contain at least one small form.
Example: The arc top includes the M top, and the M top includes the V top
(2) Based on this logic, the initial starting point of the M top pattern can be captured in the arc top pattern.
(3) Due to the uncertainty of the starting point, you should enter the market with a light position and set the stop loss at the starting point
How to determine goals丨Constraint Theory🔻
1. Definition: Top and Bottom Space
1. A market trend will only run between two bottoms and tops
2. In the rebound trend at the bottom, the target position is set at the neckline or shadow position of the top pattern
3. In the downward trend at the top, the target position is set at the neckline or shadow position of the bottom pattern.
4. It can be applied until the new top and bottom are broken
5. If the new pattern cannot be broken, the new top and bottom patterns will continue to shrink and form
2. Conditions for the formation of constraints
1. Time level parity
(1) The spatial top and bottom of the same time unit
The underlying concept that needs to be followed丨Obedience theory🔻
-Discipline to be followed (obedience conditions)
1. The smaller level obeys the larger level
(1) Small cycles are subject to large cycles
(2) Daily lines are subject to weekly lines
2. Small bands obey large bands
(1) The size of the band is determined by the price
(2) The highest price of the large-scale cycle serves as the short limit of the band
3. Short-term compliance with current trends
(1) In a large downward trend, such as the weekly chart, there are multiple small upward trends.
4. Fundamentals/News are subject to form
(1) News: international situation, political changes, geopolitical competition, natural disasters
(2) News usually has a strong lag, and negative news will trigger risk aversion.
Daily analysis framework (sequence)🔻
1. Cycle order: from large cycle to small cycle
(1) Analyze the current situation first, then analyze the big cycle: year to month, month to week, week to day
(2) Analyze the trend within the larger cycle to see if there is any trend change
(3) What stage are we in now and where are we headed next?
2. Defining the pattern and giving the actual position
(1) Determine the overall spatial scope
(2) Determine the actual or approximate entry point, stop loss point, and target price
(3) Mark the actual operation items
(4) To warn of unexpected market conditions that may occur. Example: If... then...
