As shown above, the 20-day moving average is generally used for the middle track, the yellow line (UB) is used for the upper track, the purple line (LB) is used for the lower track, and the American line is used for the price trend (simple K line, the opening price on the left and the closing price on the right).
Usage: Generally speaking, the stock price will run in the channel composed of the upper rail line and the lower rail line, and the middle rail line is the watershed of strength.
The stock price runs above the middle rail line, indicating that the stock price is in a strong position and can be held or bought. However, once it breaks through the upper rail line, it will enter the overbought area and need to consider the timing of selling. If the market falls below the middle track, it often means the end of the market.
By the same token, the stock price running below the middle rail line means that it is in a relatively weak position, and you can lighten up your position or wait and see. Once you break through the lower rail line, you can enter the oversold area and buy at the right time. If the market turnover breaks through the middle track, it often indicates the beginning of a new round of market.
In addition, as the stock price changes, the channel shape will be automatically adjusted, which is also an important reference for judging the market outlook. If the stock price falls for a long time, the upper and lower rails will gradually shrink. With the sudden rise of the stock price, the upper rail will rise rapidly and the lower rail will accelerate downward, which will form a big trumpet, which is a sign of the arrival of the big market. After a wave of strong rise, the stock price plummeted at a high level, the upper rail line turned sharply downward, and the lower rail line accelerated, forming a convergent horn, which meant that short-term adjustment began; After a period of adjustment, the stock price stabilized, the downward angle of the upper rail line slowed down, and the lower rail line turned its head upward, forming a closed bell mouth, indicating that the decline was coming to an end.