In 1984, after summarizing nearly 30 years of experience in the futures market, Peter Stamia proposed a unique set of new theories for observing and analyzing market price changes - Market Contour Theory (Market Contour Theory) Profile). Mr. Xu Yiguang from Hong Kong believes that this theory involves four factors in the market: when, what price, who, and what, so it is called the four-dimensional space.

Market contour theory takes futures and stock markets as the objects of analysis, research and observation, providing traders with new ways of thinking and analysis methods. This theory breaks through the framework of traditional chart analysis and technical analysis, reflects the divergence between market price and value in the form of images, and finds logical relationships in the market from changes in image forms, thereby inferring the future development direction of the market. . What makes this theory different from other technical analysis systems is that its unique market tracking characteristics can provide traders with a new market tracking method. Experts generally believe that this theory is very likely to become the mainstream of technical analysis and have a significant impact on the development of technical analysis.

The framework of market profile theory includes three parts: market profile chart, trading logic, and trading time. Investors need to answer two basic questions in the market: first, what is the direction of price movement in the market; second, is market trading active along the direction of price movement. Investors must understand one question during the transaction process: Who is controlling the market during the movement of market prices.

The market information contour chart mainly reflects the changing process of market price movement, represented by a unique bell curve. The TPO (Time price opportunities, Tpo's) chart records the price changes within a period of time. When a At the end of the trading day, the market profile for the day is formed. A market contour chart not only shows what happened during the session, but also shows exactly when it happened and what type of traders were involved in the market. Through the analysis of market contour charts, investors can often discover the trading characteristics of the market on that day, such as: intraday price range expansion, tail signals, the nature of the buying and selling order, the opening pattern, etc., thereby inferring who is controlling the market.

1. The origin of the four-dimensional space

The market is a place where both parties buy and sell. If buying and selling are scarce, the market will not be active. The commodity market is crowded with people during holidays. Merchant sales will increase significantly and prices will fluctuate accordingly; when the seasons change. Out-of-season items are heavily discounted and prices have dropped. Smart customers will flock to the store and rush to buy. Although the merchants sell the goods at low prices, the recovery of cash accelerates the turnover of funds, thus starting a new cycle. This is one of the laws of market economy.

The stock and futures markets also have the same economic laws as those shown in the commodity market. The concepts of price and value, which are both related and different, form the basis of market changes. As an investor, how to grasp the laws of market economy is a difficult problem.

In 1984, J. Peter Steidlmayer summarized its more than 30 years of successful experience in the securities and futures markets and created a complete set of theories for analyzing price changes in securities and futures markets - Market Contour theory, also known as four-dimensional space. In 1986, this theory was introduced in "Markets and Market Logic" co-authored by Stemea and Qiyunguo.

Fourth Dimension Space, English Market Profile, the literal translation in Chinese should be "market profile". Hong Kong's famous chart analysis expert and wave theory master Mr. Xu Yiguang made bold innovations, and Xu Yiguang introduced it in the "Hong Kong Economic Daily". The promotion and application of the four-dimensional space theory in Hong Kong and the Mainland must be attributed to Mr. Xu.

2. The theoretical core of the four-dimensional space

The analysis method of the four-dimensional space points out that price and value will always diverge. In the stock market, the two are at a level most of the time. Unequal status. The fluctuation of stock prices every day and every hour shows the inconsistency between price and value. As a smart buyer, it is best to wait until the price is lower than the value before buying.

What are the inherent laws of the stock market? What is the movement pattern of stock prices? This is a matter of benevolence and wisdom. There is really no ready formula for how high a stock price is.

Analyzing the stock market as a whole, taking the Shanghai Composite Index as an example, how many points are normal and how many points are abnormal? It is not people’s frequent subjective predictions, but objective laws at work. When most stocks in the stock market are undervalued, the natural composite index will be at a low level, such as more than 300 points or more than 500 points. On the other hand, if most stocks are overvalued, the composite index will be at a high level. With the adjustment of national macroeconomic policies and the improvement of the overall profitability of listed companies, in a few years, the Shanghai Composite Index may only be considered a relatively low level of 1,500 points, and 3,000 points will definitely be seen.

From the price analysis of individual stocks, how much is the price on the high side, how much is the price on the low side, and how to determine the standards? You will understand after careful analysis. For example: Shenzhen Development Bank (0001) stock in the Shenzhen Stock Exchange has been in the stock market since 1996. 6 yuan rose to 49 yuan in 1998, but why can't Maanshan Iron and Steel Co., Ltd. rise to 49 yuan? In the final analysis, it is the return of the intrinsic value of the stock. Of course, the 49 yuan of Shenzhen Development Bank also deviated from the value at that time, and naturally returned to more than ten yuan from 49 yuan (the price after ex-rights).

To sum up, it can be concluded that the overall stock market trend fluctuates around the comprehensive value of all stocks, while the trend of individual stocks fluctuates around the intrinsic value of the stock. Moving up and down, when the price is higher than the value, the stock price naturally falls; when the price is lower than the value, the stock price naturally rises. As for a specific stock, if the price is lower than the value, it may rise early or late, but it will definitely rise. This is the law of stock price operation.

The core of the four-dimensional space theory is to point out that price and value will always diverge, and only when price and value diverge can investors capture the time and space when the price is lower than the value and buy at low prices. stock.

3. The formula of the four-dimensional space

Price + time = value. Such a simple formula can withstand the test of a long time and is applicable everywhere.

The "time" in the four-dimensional space formula has several meanings. First, "time" is a constant, which means that only transactions per unit time can maintain the normal operation of the market. At this time, Time has no special meaning; secondly, "time" is an important aspect of buying and selling, that is to say, the time at which the price is lower than the value will not last too long, so it is very important to grasp the time of buying. It can be said that the time when the market is really at a low level is a good opportunity for those who have foresight to boldly enter the market. The time when the price is at a relatively high level is even a very short time, and it will pass if you are not careful; thirdly, "time" is a kind of waiting, that is, you have to wait for the time when the price is lower than the value before you can buy. , to wait for the moment when the price is higher than the value before selling. In a sense, one must learn to wait in the stock market center, waiting for a good buying opportunity in a short position, and waiting for the moment to sell when a position is full.

The "price" in the four-dimensional space formula changes frequently. In unit time, the price is a changing range. In a longer time range, the price changing range also becomes wider. Then the price range with larger trading volume forms the value center, so the theory of four-dimensional space has not only found the value but also found the part with larger trading volume. In other words, time + price = trading volume (value), and at the same time Also equal to value.

The "value" in the four-dimensional space formula is the core of the four-dimensional space theory and the standard for solving high selling and buying low in the stock market and futures market. Selling high and buying low is value-centered and is a revolution in the traditional analysis methods of futures and stock markets.

The value in the four-dimensional space formula. From a practical perspective, it has two meanings: the "value" of investment philosophy and the "value" of speculative philosophy.

The "value" of an investment philosophy is the intrinsic value of a specific stock in the index stock market. This intrinsic value cannot be seen from the graphics in the four-dimensional space. It is the value of the basic analysis scope. , For example: the earnings per share of a certain stock is high, but its price is low. Investors thought it was worth 20 yuan, but the stock price at this time was only about 10 yuan. For example, Shenzhen Development Bank, the price of about 6 yuan was underestimated. At that time, it rose to about 18 yuan in the first wave. Another situation is that a certain stock is expected to have broad development prospects and great potential, but at this time the price is relatively low. Stocks with high technology content often see high prices and high prices again. The reason is that the intrinsic value is underestimated.

The widest part of the four-dimensional space chart of a specific stock is the value area. Then, if the value of the value area displayed on the weekly four-dimensional space chart is lower than what is mentioned above Intrinsic value, then, this value is also the value of the investment philosophy. When the stock price rises and exceeds the value, the value displayed in the four-dimensional space diagram that appears above the intrinsic value has a speculative concept. Use the "value" of investment philosophy to choose stocks, so how to choose specifically? Consider from two aspects: The first is blue chip stocks. For example, if a stock's annual earnings per share is 0.50 yuan, it will be calculated based on the average price-to-earnings ratio recognized by the market at that time, such as 30 times the price-to-earnings ratio.

0.50 yuan x30=15 yuan

4. Detailed explanation of the four dimensions in the four-dimensional space

The "when" in the four-dimensional space refers to time. Each unit of time is divided into 30 minutes and a day, and there is no hard and fast rule. Based on the specific situation of the Chinese stock market, the author believes that small and medium-sized investors in particular do not all have personal computers. I believe that one time period per day can fully cope with the market and make profits from it.

So, it is very important to find the time when the price is lower than the value. Because, generally speaking, the price that is really far lower than the value, the so-called lowest price or low price circle, stays for a short time. Investors who are foresight must be the first to get there.

The "what price" in the four-dimensional space refers to the price that occurs per unit time. Only the high and low price ranges are considered, and the opening and closing prices are not considered. This price has two meanings: one is a price lower than the value; the other is a price higher than the value.

The "who" in the fourth-dimensional space means that long-term traders only make transactions with short-term traders, and long-term buyers and long-term sellers will not meet directly. In the Chinese stock market, long-term traders are inextricably linked to institutional investors and bankers. Long-term traders are even the bankers.

Long-term traders generally do not care about the rise and fall of short-term products, which can be divided into the above two situations:

The first one is to choose the price lower than the price based on the four-dimensional space chart. Buy a stock with value. This value is the intrinsic value of the stock. Once you buy it, you will never sell it until it reaches its true value. How to choose will be explained in detail in a later article.

For example: Shenzhen Development Bank (0001) and Sichuan Changhong (600839) in early 1996. At that time, Zuigui was seriously undervalued, and the price and value deviated. As a result, some long-term buyers attracted a large amount of goods, and launched a long-term The upward trend has returned to value in more than a year. As shown in Figure 1-1: the straight line represents the intrinsic value, and the curve represents the actual price. It can be seen from Figure 1-1 that the price difference is large.

The second type is to select stocks purely based on the four-dimensional space chart. It can be seen from the four-dimensional space chart that when a stock's value center moves laterally and no longer moves downward, and then the value center appears again, it means that the value is undervalued, and the stock price begins to move upward and returns to value.

For example, Handan Iron and Steel, see Figure 1-2. The fourth-dimensional space chart of Handan Iron and Steel was on February 1-5, 1999. The value center of the fourth-dimensional space chart was 7.50 yuan---7.55 yuan; February There were only two trading days on the 8th and 9th due to the Spring Festival holiday, so this chart is of little significance. However, after the value center successfully bottomed out at 7.45 yuan from March 1st to 5th, the value center significantly increased from March 8th to 12th. After moving to 7.70 yuan, it started an upward trend. Pay attention to the single A in the picture. The A letter on March 8 represents the exit of long-term buyers, which moves the value center upward.

In a balanced market, long-term traders are too lazy to take action when there are not many profit opportunities, and the market turnover may be less than 10%. However, when the market situation changes, long-term traders will naturally turn active. If the level of activity increases significantly, the transaction volume may rise to 60% of the total, which is what is commonly referred to as the entry of incremental funds.

Because long-term traders are in the long-term, they can calmly understand changes in fundamentals and have sufficient time to analyze the stock market. They don’t care about short-term fluctuations. Only when they have the conditions in all aspects, Only then will they strike hard at a price lower than the value. Once they buy the stock, they will wait patiently for the high point to arrive and sell it calmly. Therefore, long-term traders are the foresights of the stock market. If small and medium-sized retail investors grasp the traces of long-term traders, they will undoubtedly take the initiative and make up for the lack of information and the depth and breadth of research. Long-term traders are divided into two levels in terms of time: one is strategic investors. This type of investors often value longer-term investments, one year, two years or more. Like Warren Buffett in the United States, Investing in a company will take a long time, and the next level is the stage investors who are close to the market. They often have obvious traces of the three stages of accumulation, promotion, and distribution in the market. In the four-dimensional space diagram, such investors The buying and selling behavior of long-term investors will be exposed.

Short-term traders are generally frequent traders. They do not study the connotation of stock prices in depth, but just follow the market, chasing ups and downs. Short-term traders sell when they make a little profit, buy when the price is low, and buy and sell throughout the day.

Active buying and selling means that buying or selling is planned and there is a strategy for entering and exiting in advance. Active buying will only appear when the price is lower than the value. When the price is higher than When the price is high, active selling orders will inevitably appear. Therefore, active buying and selling orders are the real driving force for value changes. When active buying orders enter the market, the value area will naturally move up, and when active selling orders appear, the value area will inevitably move up. decline. Mastering the active trading orders is equivalent to mastering the pulse of long-term traders, and naturally the profits will be greater if you ride on the favorable wind.

Passive buying and selling refers to passively chasing ups and downs as the stock price changes. It has little impact on the value changes in the four-dimensional space chart.