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How to follow the trend

Almost all market participants acknowledge the importance of implementing trend-following trading strategies in securities trading. But in actual operation, not many investors can follow the trend. The main reasons are lack of understanding of trend trading, lack of practical experience, bad psychological influence, etc. The author believes that in order to follow the trend, one must have high levels of practice in theory, practice and psychology. 1. Understand and understand the trend analysis theory. From a literal perspective, the four words "follow the trend" are not difficult to understand, but in fact they are not. Because "potential" has different trends, such as up, down, and market trends, large, medium, and small trends, and strong, medium, and weak trends. Corresponding to different "potentials", investors' response methods must be different. Therefore, understanding the trend and seeing it clearly are the prerequisites for trading with the trend. The author believes: First of all, we must deeply study and master the classic theory of trend analysis-Dow Theory, and grasp the essence and connotation of this theory. For example, we must keep in mind and understand the objective discussion of trends: once a market trend is formed, it will inevitably develop to where it should go. The influence of any factor can only delay the trend, but cannot reverse it. Mastery of this discussion will enable investors to firmly grasp the trend and not be influenced by other factors. For example, we should keep in mind Grenville's several rules about the application of trend theory: when the price is confirmed to be in an upward trend, every day when the price falls back is an opportunity to buy; when the price is confirmed to be in a downward trend, every day when the price rises They are all opportunities to sell; when the upward price trend has not been confirmed to have been reversed, every day when the price falls is an opportunity to buy; when the downward price trend has not been confirmed to have been reversed, every day when the price rises is a sell timing. Secondly, we must learn to use dialectical thinking methods to analyze trends. The price trends that appear in different periods, different markets, and different varieties all have their own characteristics, except that the basic nature of the trends is the same. For example, the intensity of different stages of the trend is different, the running time is different, the timing and expectations for grasping the trend are also different, etc. 2. Accumulate experience in practice. Experience is wealth and is the further sublimation of knowledge through practice. Any kind of knowledge cannot be truly learned only from books. It can only be learned from books to practice, and from practice to books, repeated many times. This is especially true with knowledge of investment markets. The true meaning of following the trend is to seize the best trading opportunities in the direction of the trend. Obviously, when the price is rising, you should buy when the price pulls back to the support zone, and when the price is falling, you should sell when the price rebounds to the resistance zone. This operation is in line with the trend. There is another important prerequisite for the application of the follow-the-trend strategy, that is, the market trend must first be confirmed. Failed investors often abuse the trend concept. For example, if the concept of market trend is not established, it is not clear whether there is a trending market or a non-trending market. When the market has no trend, they still go long when it sees a rise and go short when it sees a fall. This is why investors often get "a slap on the left and a slap on the right". Therefore, it is extremely important to distinguish the trend and the stage of the trend. However, turning a strategy into conscious action requires a process and the accumulation of practical experience. A good strategy is like a good car. To make good use of this car, you must not only be familiar with its performance and features, but more importantly, you must drive it frequently and accumulate experience. Practice makes perfect. 3. Build excellent psychological quality. Yang Huaiding, a famous stock trading celebrity in Shanghai, once said this when talking about the factors that affect investment success: The success of investment is determined by three factors: psychology, method skills and luck, and these three factors play an important role in successful investment. The quantitative combination is six points for psychology, three points for skill, and one point for luck. In practice, we also have personal experience that psychological factors are the most important link in implementing the strategy of following the trend. Knowledge and experience can be improved through hard study and practice, but psychological problems involve factors such as personality, strength, knowledge accumulation, environment, etc., and it is difficult to make adjustments to achieve effective results, and there are also some factors that are difficult to overcome by personal strength alone. The psychological factors that affect successful trading mainly come from human weaknesses, including hesitation, procrastination, fear, greed, luck and other stubborn human diseases. Market opportunities are often fleeting, and hesitation and procrastination are taboos in futures trading. For example, when the market breaks through, they should react as soon as possible. However, most investors are hesitant and procrastinating at this time. They are accustomed to "first slow, second look, third pass", so when they intervene, the market He started to adjust to the point where he was trapped whenever he moved. Fear is the natural enemy of futures trading, and procrastination and hesitation are actually caused by psychological fear. Whether you should make a profit or not, whether you should stop losing or not, whether you are afraid that the cooked duck will fly... are all caused by fear. For example, when prices rise, investors tend to be afraid of high prices, and it is difficult to implement trend-following strategies; when prices fall, they are afraid that there will be no low prices, focus on prices rather than trends, and operate against the market, which ends in failure. The practice of countless successful investors has proven that following the trend is one of the magic weapons for winning in futures trading. To implement the trend-following trading strategy, one needs to deeply study and master the trend analysis theory, and turn it into conscious action in market practice; more importantly, a certain method must be used to build a programmed trading system such as decision-making, execution, and supervision, so as to overcome adverse effects. Psychological factors, develop the trading habit of consciously following the trend, and become a winner in futures trading.