There are two key points here: first, what are the driving factors of the trend? Second, how to identify the formation or change of the trend?
What are the drivers of the trend?
The internal driving factor of the trend formation can be understood as: theme. An imaginative and persistent theme, when market funds produce consistent expectations, the behavior of funds leads to the formation of trends. For example, the continuous growth of performance makes investors optimistic about a company, which leads to the rise of stock price, which may form a "slow cow" trend.
How to identify the trend has formed?
According to Dow's theory, trends are viewed from two dimensions: one is direction and the other is scale.
Direction of the trend
From the direction, the market movement is characterized by twists and turns, and its trajectory is similar to a series of waves with obvious peaks and valleys. According to the changing direction of peaks and valleys, Dow theory divides trends into three categories: upward trend, downward trend and no trend.
An upward trend is defined as a series of peaks and valleys that rise in turn.
Downward trend: a series of continuous downward peaks and valleys.
No trend: a series of peaks and valleys extending horizontally in turn. This horizontally extended range shows that the market is in equilibrium at present, and the supply and demand forces have reached a relative balance in this price range.
From the perspective of trend speculation, "following the trend" is the core. When the upward trend is formed, buy and hold more until the trend reverses and sells; When the downward trend is formed, the futures market can be short, and there is no short-selling mechanism in the A-share market, so don't operate; When there is no trend in the market, both the futures market and the stock market should "stand by".
(2) the scale or level of the trend
Dow theory divides the scale of trends into three categories: major trends, minor trends and short-term trends.
The main trend, like the tide, is the general trend of long-term market movement. Judging from the stock market, it usually takes more than one year.
The secondary trend is usually defined in a period of three weeks to several months. For example, in the long-term upward trend, the market suspends the upward trend, adjusts for several months first, and then resumes the upward trend. The trend of this adjustment is yi tooth trend.
The short-term trend is chaotic daytime, which usually lasts less than two to three weeks.
Generally speaking, Dow's theory only pays attention to the direction of big trends, chooses trading opportunities by using small trends, and pays little attention to short-term trends.
How to do trend speculation?
Find the right theme, find the right trend, and choose to enter the market in the secondary trend of the main trend until the trend changes.