We first need to introduce the relationship between appearance and essence and its role in judging trends. The public's basis for buying and selling stocks according to the price chart mainly includes the following types:
Technical indicators generate entry signals (such as MACD, moving average combinations, or self-created indicator systems).
Geometric figures combined with the golden ratio generate trading signals, such as wave methods, etc.
The public will enter the market under the signals generated by the above methods. These indicators or patterns are mainly based on price changes, so why do prices change? The fluctuations in price reflect the motives and judgments of the market participants behind the price. It is the behavior of these market participants that causes price volatility, but the question is, who are these participants? We know that among them are major players with substantial capital, also called main forces, market makers, large funds, or manipulators, etc. In short, no matter what they are called, their purpose for participating in the market is the same as the public's - to make a profit. However, in terms of their advantages, the public cannot compete with them. They can use their substantial capital advantage to manipulate short-term price fluctuations and trends, intending to lure the public into making wrong actions, ultimately leading to losses. The money lost by the public naturally flows into the pockets of the manipulators. Therefore, these manipulated price fluctuations create many illusions or traps on the chart, and indicators cannot distinguish the traps behind the price; they only reflect the surface.
The prices directly shown on the chart generate trading signals that the public trades on, making it easy to fall into traps designed by market makers. The prices, trading volumes, and various technical indicators on the chart are merely the surface manifestations in trading, also known as the first layer of market information. The information reflected by this first layer needs to be verified against the market's own behavior (essence), which means that feedback from the second layer is needed to make judgments about the trends.
Thus, the question of the trading system being effective for a period of time and ineffective for another period has been answered, and it has provided some assistance to friends who spend a lot of time modifying indicator parameters. In fact, as long as we grasp the essence of the market, we can completely abandon all technical indicators and not waste time interpreting any news, because the direct result of any news is the response of people's judgments in the market. We just need to understand these responses, which is sufficient. Of course, changing a trading habit takes time; people can never forget some trading methods learned during their initial education. However, when facing the market, we must confront challenges according to the market's rules.
We all know the cruelty of the market. To put it simply, this cruelty comes from market manipulators, who create appearances that conform to the normal psychological thinking and behavioral habits of the public. However, their true intentions are exactly the opposite, which makes trading one of the most challenging jobs in the world. This is because the obstacles arise from the public's own greed and fear, while also facing powerful market manipulators who can play psychological games with the public. To survive in the market, we must master the behavior habits of the market itself. In other words, we must be familiar with, understand, and utilize the behavior habits of the manipulators because they are human too; greed is their nature. They merely rely on substantial capital to employ schemes to influence public judgment. As long as we grasp the essence of the market's own behavior, we can respond to changes with consistency.
Market manipulators actually rely more on the active participation of the public. Without the public, they have no profit source from 'shearing the sheep' and no targets for their schemes. The result is that manipulators have to outsmart each other, and in terms of financial power and access to information, their capabilities are on par. Their operational feasibility against each other is weak because they know each other's habits and tricks too well. However, once a large amount of public capital enters the market, the manipulators' advantages and tactics can be put into play. Faced with the public, whose information and financial power are vastly different, they can easily play a deadly game.
Through the price-volume relationship or the order book interpretation shown on the chart, we can accurately observe changes in supply and demand, thus understanding the motivations of the manipulators and anticipating the upcoming trends. The supply-demand relationship is the driving force behind trends. We know that when supply exceeds demand, prices fall; when demand exceeds supply, prices rise. Accurately grasping the current supply-demand relationship not only helps us identify which stocks are worth buying, but more importantly, it helps us know the best timing for entry.
In trading, we should pursue the best trading opportunities, aiming to minimize risks. This means that even if the market moves against us after entering and triggers a stop-loss, the loss is still within the minimum range.
To study stock trends, we should investigate the underlying forces behind the price movements. Where does this force come from? If it comes from the market makers, then it is a real price movement; if it comes from the public, then this price movement is merely a trap designed by the market makers. When we look at charts, we must not focus on superficial price shapes, but rather on the manipulators behind the prices, their motivations, and how they implement their strategies. Once we understand these, we can truly know how to respond to the market from its internal details, rather than naively relying on technical indicators and geometric shapes to gather surface information about the market.
The best way to learn this method and apply it in practice is through a foolproof learning approach, discarding things you previously used to judge the market, such as: gossip, so-called expert interpretations of news, media opinions, and international political situations. Why? Because regardless of the news or major events, they eventually have to be reflected in the prices by traders. The price and volume on your chart integrate all external information into one. Once we understand price and volume, we also understand the impact of external news.
Once everyone learns and applies the methods of the market's own behavior, we have already moved ahead of those who are immersed in news interpretation in terms of logical judgment. The next step is how to integrate this method into our own trading style.