In fact, in the capital market, we often hear a well-known king's theorem: follow the wind. Those who go against the trend die. This is enough to show that even if there are thousands of changes and methods in stock trading, the trend is still king. So today, Bian Xiao is here to sort out the trend line of small stocks. Let's have a look!

Small-cap trend line

Trend line is a line used by technical analysts to draw the past price trend of securities (stocks) or commodity futures. The purpose is to predict future price changes. This straight line is formed by connecting the highest or lowest price points of securities or commodity futures rising or falling in a certain period of time.

The angle of the final straight line will indicate whether the securities or commodity futures are in an upward trend or a downward trend. If the price rises above the downtrend line or falls below the uptrend line, technical analysts generally think that a new price trend may appear.

It is generally believed that trend line analysis is a method of technical analysis, but trend line analysis must be combined with other technical analysis to achieve better results. Trend line is one of the most commonly used methods in technical analysis, but at the same time, it has not been effectively and fully utilized.

How to draw the trend line correctly, like other technical analysis methods, is very accurate. But the problem is that most traders can't draw the trend line correctly, or try to make the trend line conform to the market, and what we need is to make the market conform to our trend line.

The most basic form of the trend line is that in an upward trend, the straight line connecting the obvious support area (the lowest point) is the trend line. In the downward trend, the straight line connecting the obvious resistance area (the highest point) is also the trend line.

Drawing method of trend line

1, the trend line is to connect most of the relative highs or lows and gather as many relative highs or lows as possible on a certain line. The more points are gathered, the more effective the trend line is.

2. The problems that need to be paid attention to when making the trend line, and the practice of the trend line: most investors are used to drawing the trend line from left to right; When drawing a trend line, we should also pay attention to excluding some extreme highs and lows, or abnormal intervals, and decide whether to exclude them according to experience; In a certain trend, the trend line should gather as many relative highs or lows as possible, and the price slope should be as close as possible to the trend line slope.

Trend lines and channels are very useful in operation, but their importance and accuracy are easily misinterpreted and exaggerated. Because the trend line often needs to be constantly revised in the process of market operation and finally confirmed according to the experience afterwards, its reliability is easily overestimated. For example, an uptrend line was broken down, which was originally a selling signal, but the market outlook found that the trend line was not broken down after being corrected, and the selling signal generated before was denied.

How to buy stocks with trend line

When the trend line is obviously broken and cannot be corrected, it means that the market is about to undergo major changes, which may be a buying signal or a selling signal. The more important and effective the trend line is, the stronger the signal that the trend is about to reverse. When the upper channel line of the sideways trend is effectively broken, it will be transformed from the pressure line to the support line of the upward trend; When the lower channel line is effectively broken, it will be transformed from the support line to the downward pressure line.

Confirming that the trend line is effectively broken is the most critical issue, which is related to the accuracy of our trading points. According to experience, three conditions need to be met: the closing price must break through the trend line up or down; After breaking through the trend line, the farther away from the trend line, the more effective it is. Rebound or stepping back cannot break through the trend line again. When the long-term trend line is broken, the closing price is required to break through the trend line by at least 3%; When breaking the long-term trend line, the closing price must be on the side where the trend line is broken for more than three consecutive days, and the longer the stay, the more effective it is.