Recently, many investors have a question, which is whether the market's current decline has also killed the technical analysts.
Or, can technical analysts make money in this market.
It is impossible to make money, even the quantitative funds with good performance in the previous years have also been defeated in the recent market crash.
In a one-sided falling market, apart from being empty, only the short sellers can make some money.
But we cannot think that the technology has no value just because the technical analysts also lose money in the bear market.
Some technologies may fail, but the essence behind the technology is actually the same.
If you are a technical analyst and your loss in the current market far exceeds the entire index, there must be a problem.
Because the real technology can also cope with the bear market, at least it will lose less money in the bear market.
In the doctrines believed by the technical analysts, there must be a few common methods.And these several methods can actually effectively help the technical analysts to avoid risks in the market.
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Firstly, try not to participate in stocks that are in a downtrend.
The vast majority of technical analysts only deal with stocks in an uptrend and rarely get involved in those in a downtrend.
Or, even if the overall market is in a downtrend, they only deal with individual stocks that are in an uptrend.
Once a stock enters a downtrend, it is actually bottomless.
For technical analysts, the first priority is to ensure their investment win rate.
From a technical statistical perspective, the opportunity to make money by buying the dip is far less than the opportunity to make money by buying the rise.
This does not mean that technical analysts will definitely chase the rise and kill the fall, but it illustrates that buying stocks on the way down is actually irrational.
Especially when the trend has not yet turned, the stock price will continue to move further down with the trend.
Technical analysis itself pursues the maximization of the ratio of returns to risks.In an uptrend, there is no ceiling for stock prices, while in a downtrend, there is a limit to the space for rebound.
From this perspective, technical analysts are very averse to downtrends and try to avoid participating as much as possible.
Therefore, true technical analysts are usually not deeply trapped in a downtrend.
Secondly, if you buy the wrong stock, you must stop the loss in time.
Technical analysts have an ironclad rule that is key to ensuring they lose less, which is to stop the loss.
Technical analysts are actually very strict about stopping the loss because they need to protect the principal.
The essence of stopping the loss is not necessarily to reduce losses, but also to control the proportion of risk losses and ensure the safety of the principal.
The reason for stopping the loss is that the market trend does not match our judgment, and the misjudgment leads to losses, which is why there is a need for stopping the loss.
Since the stock was bought wrong, it can be directly cut off.Even if the stock prices rise again later, it does not necessarily mean that your prediction is correct.
It can be said that one should correct the mistakes first, then make new judgments. After the stock prices rise, decide whether to chase or not.
The essence of the technical school is to strictly follow the technical rules for execution, rather than waiting for opportunities with a sense of luck.
Thirdly, when the oversold divergence rate is very large, one can take the opportunity to rebound.
Technical analysts do not avoid bottom-fishing, but their way of bottom-fishing is only one, called oversold.
Moreover, they do not call this method bottom-fishing, but rather taking the opportunity to rebound.
When the stock's decline is too large, it will lead to a large amount of loss funds choosing to lie flat, waiting for a rebound before selling.
Therefore, theoretically, the selling pressure will gradually decrease during the stock price decline.
When the selling pressure is small and the stock price is cheap, there will naturally be more people who want to bottom-fish, and a rebound will naturally occur, which is also a very natural technical correction.
At this time, some technical analysts will choose to bottom-fish these stocks.But this is merely an ultra-short-term action, and does not represent their long-term optimism about this stock.
The essence of technology is actually to use emotions to make rational judgments, and then to harvest funds with emotions, which is not that complicated.
And situations like oversold rebound are just one of them.
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In addition to these, there are several more commonly used methods in the technical system.
For example, technical confirmation at the bottom.
The confirmation of the bottom requires a clear bottom structure.
There are only a few types of bottom structures, such as W bottom, N bottom, V bottom, U bottom and other patterns.
These bottom patterns are actually very important.
Retail investors are always guessing the bottom, especially when the market rises in a V shape, they will think it is the bottom.In the actual historical process, the V-shaped bottom only appeared in 1849, and there was only this one major bottom that formed a deep V.
The vast majority of bottoms are still W-shaped, N-shaped, and U-shaped.
These types of bottoms require a small cycle, at least 8-10 trading days, for the technical pattern to take shape.
Therefore, in the eyes of technical analysts, the polishing of the bottom requires time and is not something that can be achieved overnight.
Many judgments about the bottom are actually just wishful thinking, and it is not reliable for everyone to guess.
For example, using technical analysis to judge the continuation of a decline.
Most of those who bottom-fish in the middle of the mountain are the so-called value investors, and technical analysts will not bottom-fish in the middle of the mountain.
Because technical analysts will calculate the decline space and determine where the intermediate platform is.
Usually, from the top down, if there are not about three platforms, technical analysts will choose to remain indifferent.
The first platform is often the last platform of the upward trend, and once it is broken, it is an abyss.At this time, patiently waiting and not participating is the best choice.
The second platform is often a continuation platform in the downtrend. After breaking through, it has fallen for a while and needs a platform to buffer, allowing the bulls to cover and the bears to continue to sell off.
The third platform has mostly entered a relatively reasonable valuation range, and funds are gradually bottom-fishing.
However, it is entirely possible to have a fourth or even a fifth falling platform, which requires specific analysis for specific issues.
For example, the gap theory can be used to judge the short-term market direction.
A gap is a pulling force, but not every gap will be filled in the short term, and the gap theory also has guiding suggestions.
A gap appearing in the downtrend is a standard basis for judgment from a technical point of view.
An escape gap means that the decline has just begun, and it is necessary to resolutely cut losses and exit the market.
But if an exhaustion gap appears, it means that the last fall is about to occur, which is an excellent opportunity to buy.
In the original market, the gap theory was very popular, and gaps one, two, and three rarely made mistakes.In today's market, there can be instances where four or five gaps appear, making it extremely difficult to judge. It is necessary to combine time cycles and spatial points for analysis.
Once a misjudgment occurs, it is often easy to fall into an irreversible situation.
In some cases, such as after a series of downward gaps and stabilization, leaving more than three gaps, at least the last gap will be filled. This kind of theory remains a good remedy for bottom-fishing.
I have only heard of people who are not proficient in technical learning, but I have never heard of the idea that technology is completely useless.
In the short term, due to some market emotions, technical analysis may fail, but in the long run, technology still permeates the market.
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