Wave theory can be divided into five waves rising and three waves falling. Generally speaking, these eight waves have different performances and characteristics:
Wave 1: (1) almost half of wave 1 belongs to the first part of building the bottom form, and wave 1 is the beginning of the cycle. Because the rise of this market appears in the rebound and reversal after the fall of the short market, the buyer's power is not strong and the short market continues to sell. So in this 65438, the other half wave of (2) 1 appears after long-term consolidation. In this wave of 1, its market rose sharply. Experience shows that 1 wave is usually the shortest among the five waves.
The second wave: this wave is a downward wave. Because market participants mistakenly thought that the bear market was not over yet, the adjustment fell by a considerable margin, almost eating up the increase of 1 wave. When the market falls near the bottom (1 the starting point of the wave), the market appears reluctant to sell, the selling pressure is gradually exhausted, the trading volume is gradually reduced, and the second wave of adjustment will come to an end. In this wave, there is often a turning point.
The third wave: The rising trend of the third wave is often the biggest and most explosive rising wave. The duration and amplitude of this market are often the longest. The confidence of market investors has recovered, and the volume of transactions has risen sharply. Breakthrough signals, such as cracks and gaps, often appear in traditional charts. This market trend is very intense, and some graphical barriers are easily broken, especially when breaking through the high point of 1 wave.
The fourth wave: The fourth wave is the adjustment wave after the market rose sharply. It usually appears in a complex form and often appears in the trend of "inclined triangle", but the bottom of the fourth wave will not be lower than the top of 1 wave.
The 5th Wave: In the stock market, The 5th Wave usually rises less than the third wave and often fails. In The 5th Wave, the second-and third-class stocks are usually the dominant forces in the market, and their gains are often greater than those of the first-class stocks (blue-chip stocks with excellent performance and large-cap stocks), which is what investors often say. At this point, the market sentiment is quite optimistic.
A wave: In A wave, most market investors believe that the rising market has not reversed, but it is only a temporary phenomenon. In fact, the decline of A wave usually has early warning signals in the fifth wave, such as the deviation between trading volume and price trend, or the deviation from technical indicators. However, because the market is still optimistic at this time, A wave sometimes appears flat adjustment or zigzag operation.
B wave: the performance of B wave is often a small transaction, which is generally a long escape line. However, because it is a rising market, investors can easily mistake it for another wave, forming a "bull market trap", and many people are trapped in this period.
C wave: it is a destructive falling wave, with great strength, great decline, long duration and overall decline.
From the above, the wave theory seems quite simple and easy to use. In fact, because every complete rising/falling process includes an eight-wave cycle, there are small cycles in the big cycle and smaller cycles in the small cycle, that is, there are small waves in the big waves and small waves in the small waves. So the number of waves becomes quite complicated and difficult to grasp. In addition, there are often varied and complicated modes in its driving and adjusting waves, such as extended waves.