As far as the long-term factors of commodity market are concerned, the main factor affecting the rise or fall of market prices is the relationship between supply and demand of commodities. However, in the short term (usually hours, days or weeks), the market trend is often completely opposite to the fundamentals, because in such a short period of time, investment decisions often come from investors' psychological judgments and are always influenced by factors such as hope, fear, greed and anxiety.
Volume and position can clearly show the instantaneous change of price. By analyzing these two indicators, we can find out whether the real strength in the market is multi-party or empty. The strong position is the direction of the main price trend, and the strength in the market represents smart funds. Traders can judge the trend of smart funds by analyzing the changes of trading volume and positions, and find out the true intentions of successful traders in the market.
I. Quantitative indicators
Volume refers to the total amount of futures contract transactions in a certain period of time. The formula is: volume = number of contracts bought+number of contracts sold. Among them, buying contracts and selling contracts, whether opening or closing positions, are counted.
Volume represents the urgency of the market. It is the result of the trading demand of investors or traders in the market, because nothing is more urgent than dealing with the loss position in the market. From the combination of volume and chart, we can see what the losers in the market are doing. Therefore, technical operators should learn to check the urgency in the market in order to evaluate the strength of the price direction at that time. However, it should be noted that the specific turnover figures have no special significance. For example, it is of little significance to analyze the turnover of a certain day alone. We should divide the turnover into three grades: high, low and average, and make a coherent analysis.
1, an ideal and stable upward trend-an ideal bull market should have the phenomenon of rising both quantity and price. The trend of strong price increase should be that the volume increases when the closing price rises and decreases when the closing price falls. Even in the most prosperous period of bulls, prices can't keep rising. Traders can check the strength of bulls by observing this cyclical and inevitable selling pressure. If there is no urgent selling pressure in the market, then when the price falls, there should be a pattern of decreasing quantity. Although the price is falling, from the perspective of trading volume, the bulls are not in a hurry to kill it. Therefore, "low volume decline" is an ideal bullish indicator in the bull market. It tells smart traders that the main trend of prices is still rising, and as long as they wait for the callback to end, bulls will launch an upside again. 2. An ideal and stable price downward trend-the ideal short market should be that the volume increases when the price falls and decreases when the price rises. But this is not completely absolute. Many times, we can see that the price continues to fall under the condition that the transaction volume is not very large. At that time, because the price has its own weight, it can be lowered, and there is not much selling pressure. 3. The phenomenon of sudden increase in trading volume-whether in a bull market or a short market, the inexplicable sudden increase in trading volume is a very noteworthy signal. Traders should never ignore this signal, otherwise it may be doomed. The surge in trading volume often indicates that the trend is about to change. It is worth noting that the so-called surge in trading volume is not a general amplification, at least it should be more than twice the average daily trading volume of 10. At the same time, the surge in trading volume does not mean that the trend will be reversed immediately. It may start to reverse in the next few days or weeks, or it may just be a large-scale rebound or callback. The surge in trading volume is the easiest to understand in a specific market structure. If the market is in a disoriented consolidation or shock, this surge may not bring much value to traders. For example, in a bull market, the trading volume suddenly increased sharply. On the daily chart, it can be a positive line, a negative line or a cross star line. We can see a particularly prominent bar in the trading volume window. At this point, traders should question whether there is anything urgent happening in the market today. The answer is yes, although we don't know what it is, something must have happened, which put the top traders in trouble, and their forced stop loss brought the last wave of gains to an end. As to whether this situation is caused by short covering, we can judge from the change of positions. If the trading volume increases sharply and the positions decrease sharply, it can be determined that the bulls are profiting from the shipment, and the bears can't bear the floating losses and are lightening their positions. If the K-line is still the positive line, it means that many new bulls are taking the last stick, and they are about to act as cannon fodder. In the short market, the price has been falling all the way, and suddenly there is an amazing amount, which undoubtedly tells technical analysts that there is at least a wave of large-scale rebound in the market, because the long traders who are bargain-hunting are eager to make up their positions when they are forced to stop losses, ending the final decline of the market.
4. Breakthrough a lot-all traders must understand the fact that if the price breaks through after a long period of consolidation or shock, it may be that when the price breaks through a long-term trend line, the most powerful indicator to judge the effectiveness of the breakthrough is the effective amplification of the trading volume, especially the upward breakthrough, and the amplified trading volume must be seen; If there are a lot of downward breakthroughs, it is more likely to be a real breakthrough. However, if the volume is not enlarged, it does not mean a false breakthrough, because the weight of falling prices can also make the breakthrough effective.
5. Break through the difference between a large number and a sudden increase-a breakthrough usually occurs when the trend starts; Sudden rises usually occur at the end of the trend. Traders should learn to distinguish between the two situations.
Second, the position index
Open position refers to the number of all open buy or sell contracts at the end of the transaction. What is different from the volume is that the open position refers to the unilateral quantity, not the sum of the sales contracts. It is expressed by the formula: the number of positions = the number of open buying contracts = the number of open selling contracts.
Futures trading is a zero-sum game. For every dollar of profit, there is an equal loss of one dollar. Of course, futures exchanges and brokerage companies will take a small part. However, for each open contract, there must be a position in the market opposite to the other hand. At the end of the transaction, the number of all open long contracts must be equal to the number of open short contracts. As for the saying that traders often say "buy more than sell" or "sell more than buy", it is not true. It is more appropriate to say that "potential buying is greater than selling" when the price rises, and "potential selling is greater than buying" when the price falls.
In futures trading, people who make money must lose money. If traders correctly judge the market trend and make money, where will the money come from to pay their profit positions? Yes, this is a loss-making position. Although it sounds uncomfortable, this is the real face of the futures market. Through the analysis of positions, we can know what those who hold loss positions are doing. As a trader in the futures market, we must clearly understand what kind of information the change of positions can bring us.
1, the position is the fuel to maintain the price trend-I compare the market to a train, the train needs fuel to start, and the position is fuel. When the fuel runs out, the fire will naturally go out, and the train will have no motivation to continue running. If the fuel of the market trend runs out, the trend will stop or reverse. When the position is gradually reduced, it means that the fuel on the market is decreasing, and the original price trend will not last long. In order to continue the stable and strong price trend, we need to see that the positions are increasing steadily, if not increasing, at least not decreasing. If a trader can understand that opening a position is synonymous with market fuel, his trading knowledge is at least better than that of other 80% traders.
2. Holding positions is an indicator that there are different opinions in the market-a market cannot be formed without different opinions. Even in a bull market, people are always short; In the short market, there will always be people who do more. Different opinions will make traders willing to open positions, thus increasing their positions.
3. The change of positions determines whether the loss-making positions are replaced-technical analysts don't care whether the loss-making party uses new funds to make up the margin or new traders join in to replace the old losses. The key is that the funds are deposited in the settlement center of the securities firm. The losers in the market must pay the winners. When the losing party is unwilling to hold the losing position again and cuts the position, it will reduce the position. Obviously, the misjudged party paid the price. But for technical analysts, with the reduction of positions, it shows that losers are gradually withdrawing from the market, and losers can't just be winners. Unless a new loser joins, it indicates that the original price trend will no longer be stable. Even if it doesn't reverse soon, smart funds will gradually leave with the loss-making party. Both losers and winners are gradually leaving the market, and the fuel to maintain the original price trend is gradually exhausted. Of course, the original trend cannot continue.
4. An ideal and stable upward trend-as the price rises, the steady increase of positions is a stable upward trend signal. As a technical analyst, you should always monitor what the profit-making party is doing, because you must stand on the side of the profit-making party to become a winner. In the upward trend, prices are rising, and it is obvious that bulls control the situation. The price increase indicates that the original bulls are adding positions or new bulls are joining, but at the same time, the short positions in the market are also increasing costs or new short positions are entering the market. In either case, it means that the market is on a steady upward trend. Some people may question, isn't the buyer always equal to the seller in the market? Yes, but the key lies in which side dominates the market. The direction of price movement is controlled by the strong side. Those who are eager for long-term profits are willing to pay higher prices, while short sellers who lose money are forced to share the costs. If the price is rising and the position is decreasing, what does it mean? It shows that the bulls are profiting from liquidation and the bears are also lightening their positions. The price increase is due to the opening of new bulls, but all the main bulls have left. Predictably, it is obviously difficult for the power of the new retail bulls to maintain the continuation of the price trend, but it is uncertain whether there will be a reversal, because the market has not only two directions-up or down, but also a possibility of flat consolidation, that is, shock.
5. Ideal and stable downward trend-When the price falls, the gradual increase of positions is a stable downward trend signal. This phenomenon shows that bears dominate the market trend, they are establishing new profit short positions, and bulls are also trying to spread costs downwards and increase loss positions. Bulls regard themselves as "cannon fodder" and constantly provide fuel for falling prices. Different from the bull market, in the short market, the price falls, even if the position is not increased, the downward trend will continue as long as it is not reduced. Only when profitable funds (short positions) stop making profits will the original trend stop. The decrease in positions represents that the market has lowered its expectation of the continuous price decline, and the fuel that contributed to the price decline has also decreased. It is worth noting that the ideal and stable short market usually happens less than the ideal and stable long market, and the common phenomenon in short market is the reduction of positions. If you want to see the increase in positions, I'm afraid there are not many such opportunities. This is because first of all, the price falls with self-esteem, and secondly, most traders are not used to shorting. I have met many such customers. I told him I could go short, but he told me to wait until he fell to the bottom before telling him to go in and buy. As a technical analyst, if you hold a short position in the short market and can see that the position remains at a flat level, you should be satisfied, because in this case, the losing bulls are gradually replaced, and the short fuel is still maintained at a certain level.
6. The price is stable, and the position is increased-when the price fluctuates in a range or the market is sorted out, when the position is increased, it means that both long and short sides are launching an offensive. Once the closing price breaks through the range on a certain day, the driving force brought by the loss-making stop loss cannot be underestimated. When seeing this phenomenon happen, technical analysts often pay attention to the breakthrough with their eyes wide open, so as to be present at the first time.
7, the price is stable and lighten the position-such a market must be dead and lifeless, the price is consolidating, and both long and short sides have no intention of opening positions, so traders can not pay attention to this market for the time being.
The strength of analyzing price trends can be measured by the relationship among price trends, trading volume and positions. When the price moves in the main trend direction, the volume of transactions and positions will also increase. However, in the short market, when the price falls, the ideal state of steady increase in trading volume and positions is rare.
Although trading volume and positions are important indicators for technical analysts, none of them is omnipotent, and the use of indicators is not mechanical, so they must be analyzed together with other indicators. What we need to understand is that futures trading is not a science, but an art, which requires not only the imagination and free-spirited mentality of the artist, but also the rigorous operational attitude and self-discipline of the scientist. This is precisely the key to the most difficult success of futures trading. Few people can achieve the harmony and unity of the two. Once you do, you will succeed in this industry.