Trends are an incredibly important basis for our operations, and in our fundamental analysis, we utilize the role of our knowledge to excavate value. Almost all operations in our technical analysis are closely related to trends.

What is a trend?

A trend refers to the primary direction of fluctuation in the market over a period of time. Stock prices do not move in a straight line continuously upward. Generally speaking, the fluctuations in stock prices form our market, and thus they form our trends.

Typically in the market, price fluctuations are composed of a series of ascending or descending peaks and troughs. When these continuous peaks and troughs develop according to a certain pattern over a period of time, they form the trend of price development within that time frame.

In other words, the peaks and troughs exhibit a pattern during their fluctuation process, and within a certain time frame, they follow a regularity.

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This pattern, as it evolves over time, forms a trend within a certain period, which is why the success rate of our common buying and selling operations is closely related to the trend. We should follow the trend rather than go against it and engage in contrarian operations. Contrarian operations will reduce our success rate.

What forms do trends take?

We speak of uptrends, downtrends, and horizontal trends, which are the three common forms of trends.

Firstly, let's discuss uptrends. Uptrends are the most important operation in the process of buying and selling stocks because in our A-share market, profits can only be made by buying on the rise. Therefore, uptrends are incredibly important as a basis in technical analysis within our A-share market.In an upward trend, its peaks and troughs gradually ascend in sequence. A higher peak means that the subsequent peak should be higher than the previous one, and the lowest low point forming the trough should also be higher than the previous trough. In other words, the overall situation is upward, with peaks surpassing the previous ones and troughs surpassing the previous ones, thus constituting an upward trend.

Similarly, a downward trend is characterized by a decrease in peaks and troughs. In a downward trend, the subsequent peaks are lower than the previous ones, and the troughs are also lower than the previous ones. The peaks are below the previous peak, and the troughs are below the previous trough, thus forming a downward trend, which is what we commonly refer to as a declining trend.

During a downward trend, it is advisable to go short rather than go long against the trend.

There is also a situation where the stock price peaks and troughs move horizontally, with the peaks and troughs developing in a horizontal direction, neither rising nor falling. There is no situation of ascending or descending progression. At this time, we call it a horizontal trend, which is also what we often refer to as what? Sideways consolidation.

So when we choose to go long, we must do so in an upward trend. When we choose to go short, we should utilize this downward trend. And when the stock price, or the K-line, is in a sideways consolidation, we generally adopt a wait-and-see approach from the sidelines, or follow the horizontal trend, selling at the peaks and buying at the troughs for short-term operations. This is the horizontal trend.

Trends also have a characteristic of varying sizes, so trends are scalable.

Taking gold trading as an example, our understanding of following trends in gold trading is often influenced by the investor's own trading plan. Different trading plans require corresponding scales and trends, which must be well-coordinated.

How to put it? That is to say, are we basing our decision to follow or go against the trend on the scale of a 15-minute trend or on the scale of a daily K-line trend? For instance, if our daily line shows an upward trend, but at the 15-minute level, it might be a downward trend. If you enter and trade the 15-minute downward trend, you are going with the trend.In contrast, following the trend is actually going against the trend when it comes to the daily line. Therefore, when it comes to following or going against the trend, it is essential to pay attention to the qualifier that precedes it, to have a scale, and to operate on a scale. It is crucial to determine what level it is before entering the market.

If you treat a 15-minute trend as if it were a daily trend, and you are shorting following the trend on the 15-minute scale, you are actually going against the trend on the daily scale. Therefore, you can only hold the position for the duration of the 15-minute trend. When the 15-minute trend ends, you must exit the market.

We should follow the trend and distinguish the scale of the trend, that is, the level of the trend. When we engage in long-term trading, we should choose the primary trends of the daily line and above, even the weekly or monthly lines. This is the primary trend for long-term trading, the secondary trend for medium-term trading, and the short-term trend for short-term trading. Sometimes we even base our trades on the fluctuations of the tick line, or very short-term trades like 1-minute or 5-minute trades, which are called short-term trends.

In summary, no matter how large the scale of the trend is, that is, the level of the trend, we must recognize it and define our operations as following the corresponding level of the trend. This is the scale of the trend.

Generally, we can also operate in the following way during actual trading. For example, if I have taken a long position in gold on the daily scale, I can take a retracement of 15 minutes or more during the actual operation.

When the retracement ends, and the adjustment ends, we must exit in a timely manner, close the position, and then re-enter the market to go long. During the trend-following process, we can have a heavier position; when going against the trend, we must be careful to reduce our position relative to when we are following the trend, even only doing half or a fraction of it. This is a method for operating against the trend.

The main focus of this lesson is the trend. We should follow the trend, which requires us to go with the trend. We must thoroughly understand the development and corresponding levels of market trends and use different levels of trends reasonably according to the trading plan. This is the foundation of success in our actual trading process.

Following the trend and avoiding going against the trend as much as possible is a piece of advice for our actual operations.