ATFX - Speculative behavior theory full analysis!

<atfxFirst, human ability and inability

1. Judging the direction of price movement:

So far, humans have not been able to judge the direction of price movement absolutely correctly. No matter what combination of market conditions constitutes the module, as long as the number of specimens collected is sufficient, we will find the fact that when the market operating state meets the definition of the module, the price movement can rise, fall, and adjust horizontally.

Although humans cannot make absolutely correct judgments about the direction of price movements, we can study the modules composed of various combinations of market conditions and the incidence of increases or decreases.

2. Judgment of the price range:

There is such a theorem in the philosophical system of Dow theory, called the "unmeasurable theorem of major forward waves". This theorem states that the time and amplitude of major forward waves are unmeasurable. Humans 100 years ago did not have the ability to measure major forward waves, and humans today do not have the ability to measure major forward waves. Therefore, investors are advised to use trend following techniques in the investment process, rather than trend forecasting techniques.

The trend of modern financial investment is to pursue the scientific nature of investment behavior, emphasizing the quantitative evaluation of the consequences of investment behavior. The following principles can be followed in the process of investment research. Although humans cannot judge the amplitude of price movement absolutely correctly, we can find the module composed of various market conditions through research, and the incidence of price movement amplitude within a fixed range.

3. Basic inferences:

From the above principles, we can draw the following inferences. In financial marekt, there is no hard law for investors who use technical tools, namely: "When condition A is met, event B will definitely happen". Many technical investors pursue this goal and work hard, but the result is often a loss in the investment market. When they summarize their experience, they often come to the conclusion that "the failure of investment is because their efforts are not enough and they need to continue to work hard", without knowing that the goal they pursue (when condition A is met, event B will definitely happen.) does not exist at all. In this way, technical tools should be useless, but they are not. Technical tools are useful, because there is another soft law in the market, that is: "When condition A is met, what is the probability of the occurrence of event B". Since humans cannot judge the direction and range of price movement absolutely correctly, in the actual investment operation process, investors cannot pursue the goal of single behavior results, but only the total result of N repeated investment behaviors. From this, we can draw the following introduction: "In the field of financial investment, it is a correct investment philosophy to base the inevitability of N repeated investments on the randomness of profit and loss of single investment behaviors."

The true meaning of technology-based investment

1. Three prerequisites for the establishment of technology-based investment:

The market price includes everything.

Market prices can contain all the factors that affect the market. Suppose there are N factors affecting the market at the same time, among which X are bullish and N-X are bearish. These N bullish or bearish factors will form a combined force in the market, which will determine the direction of market prices. The theme of technical investment research is how market prices will operate under the action of the above combined forces;

Prices evolve in a trending manner.

Looking at the historical chart, we can easily find that the price evolves in a trending manner. Push and adjust alternately, forming a round-by-round trend.

③ History will repeat itself:

The repetition mentioned here refers to the repetition in the sense of probability, rather than mechanical repetition. In all relevant materials, we can see that history will repeat itself, but the relevant logical inferences cannot be found. In view of this, I try to infer that history will repeat itself, for reference only.

2, because in the technical investment of financial marekt, there are no inevitable events, only conditional probability events.

So the true meaning of investors' pursuit of success should be: "Follow the principle of engaging in high-probability events, do not pursue the result of a single action, but pursue the total result of N repeated actions".

3. For the same reasons as above, all technical tools must be evaluated at the level of probability for their investment function.

It is common to hear someone say: "Technical analysis is useless, an analyst said that the market will go up one day, but it will go down". The above discussion contains a misunderstanding by two people

A: It is common for the speaker to misunderstand the function of technical tools and how to use them.

B: Professional analysts also misunderstand the function of technical tools and the use of technical tools, which is a terrible phenomenon because the result is often harmful to others.

III. Re-understanding of concepts related to financial investment

1. Regarding investment risks:

(1) The concept of risk: Talk about risk in general, it is a concept that represents the potential loss possibility in the process of financial investment. For a mature professional financial investor, the investment risk is a specific and accurate number in each specific investment plan.

(2) Source of risk: The risk of financial investment does not come from financial marekt, but from the investment method of investors. The same account is on the same financial marekt, and the risk characteristics reflected by different investment operation methods are completely different.

(3) The nature of risk: investment cost. The manifestation of financial investment cost is the risk assumed during the investment process;

(4) The logical relationship between expected risk and expected profit: similar to the relationship between bait and fish in the fishing process.

2. The cultivation method of financial investment internal strength:

Reading charts and charts is the only way to cultivate the inner strength of financial investment. Suppose an investor does not know any investment theory or any investment tools, as long as he can remember 5,000 K-line charts, he is an investment expert. Although he does not know any moves, he has deep inner strength, similar to a master of inner strength in the field of martial arts. As long as such investors have a little understanding of investment principles, their trading results will be better than most traders without inner strength on financial marekt.

There are certain skills and methods for reading pictures and recording pictures, and mastering these skills and methods is conducive to improving work efficiency and achieving the purpose of getting twice the result with half the effort. General method: Divide the significant tops and bottoms into three categories, which are used to mark the main forward wave, the secondary reverse wave and the daytime clutter. Then divide the price fluctuations between the top and bottom of the same kind into bands, and remember the scale, speed, quantity energy, and necessary dynamic system status of each band respectively.

Deep investment ability is not only a necessary condition for schema trading, but also a necessary condition for modular hypothesis in the process of modular investment research.

3. In the field of financial investment, portraits of investment behavior of non-professional investors:

In the financial investment market, a non-professional investor buys a stock or a futures contract at a fixed point in time. The essence of the event is as follows: under the advisory state he is facing at that time (the advisory state can be a technical analysis conclusion or a fundamental analysis conclusion.), he believes that a price increase is a high probability event, so he buys it. But there are three problems he cannot solve.

(1) It is meaningless for someone to believe that a price increase is a high probability event when a fixed consultation state occurs. It is meaningful only if the market accepts that the fixed consultation state occurs, and the price increase is a high probability event. Non-professional investors cannot guarantee that personal perceptions match market acceptance.

(2) What is the specific probability of a price increase event? do not know. Therefore, its trading method does not have a betting adjustment function.

(3) Many investors' trading behavior lacks planning and there are no clear rules for entering and exiting the market. Once the transaction is launched, human weaknesses (such as greed, expectation, fear, etc.) will seriously affect objective judgment.

4. Indicators of profitability:

All financial investment participants want to have profitability, so what are the signs of profitability? Many people have incorrect understandings about this issue. There are three capabilities that are often mistaken for profitability, which are now analyzed one by one.

(1) Profitability does not equal profitability.

Some people have experienced periodic profits or one-time profits, and they think they have profitability. This understanding is wrong. Profitable experience does not equal profitability.

(2) The ability to see the market does not equal profitability.

Some investors think they have the ability to make profits because they have a strong ability to see the market. This understanding is also wrong. First, if their investment behavior does not have risk monitoring measures, that is, no stop loss, then they can make a profit as long as they see the market. But humans cannot guarantee that the judgment of the direction of price movement is absolutely correct. If they read it wrong once, it is a disaster. Second, if their investment behavior has risk monitoring measures, that is, there are stop loss regulations, then they can also lose money by looking at the market.

(3) The ability to influence market prices does not equal profitability.

When some institutional investors control a stock or a futures contract by more than a certain percentage, their trading behavior will affect the market price, and even determine the price's rise and fall in a short period of time. But this ability to influence market prices does not equal profitability. The case of bankers losing money has happened many times in international and domestic financial marekts, that is to say, investors who have the ability to influence market prices can still lose money.

5. The life infra of financial investment:

Adhering to the execution of a trading plan is the life infra of financial investment. It is easy for an investor to execute a trading plan once, but it is meaningless to execute a trading plan once. Here you can quote a passage from Chairperson Mao, "It is not difficult for a person to do a good thing, but it is difficult to do good things and not do bad things in a lifetime." Corollary: "It is not difficult for an investor to execute a trading plan once, but it is difficult to execute the plan for a lifetime. There are no transactions that change the plan, and no unplanned transactions." Survey data show that among all financial investment participants, 20% of investors can execute a trading plan 10 times in a row, 10% can execute a trading plan 20 times in a row, and less than 1% can execute a trading plan 100 times in a row. This is the fundamental reason why the vast majority of people in financial marekts are losers.

6. K-line diagram decomposition:

The k-line chart we usually see can be decomposed into three curves, A, the basic market supply and demand curve, B, the speculative factor curve, and C, the policy curve. In fact, the price curve we see is formed by superimposing and merging the above three curves. The basic supply and demand curve has a long fluctuation period, and the curve fluctuates gently. The speculative factor curve has a short fluctuation period, sometimes violent. The policy curve shows a strong sudden nature. The object of basic analysis is the basic supply and demand curve, and the object of medium and short-term technical modules is the speculative factor curve, that is, the regularity of all market participants and group behavior. The object of long-term technical modules is the speculative factor curve plus the basic supply and demand curve, which not only contains the laws of group behavior but also contains the basic economic laws.