In the previous article, I shared the identification of change points, which can be used as an early warning signal and as an accurate buying and selling point signal, but not all change points are effective.
First, let's revisit the definition of variable inventory:
In the order, the latest** falls below the lowest price of the previous one**, then the lowest price of the previous ** is the change point, and the latest** is the change**.
In the order, the latest**rise breaks through the previous one**most**, then the most ** of the previous ** is the change point, and the latest** is the change**.
As shown in Figure (1):
Figure (1) From the definition of variable inventory, we can also know:
1.**Order, is the lows and highs continue to rise, as long as the latest price does not fall below the previous **lowest price, hold a long order, do not short.
2.**Order, is the low and high point of the continuous reduction, as long as the latest price does not rise above the previous **most**, hold a short order, do not long.
See Figure (2), shown:
Figure (2)**In the order, **the trend of continuous non-breaking of the previous low and constantly hitting new highs is a strong bullish trend**;In the order, the trend of not breaking the previous high and constantly hitting new lows is a relatively weak signal for the bears to change the inventory point to become a reversal trend, and most of them are just a short-lived ** signal.
Grasp such a feature and improve the winning rate of accurate entry of the change point, we may as well use itFollow the main trend and reverse the secondary trendThe trading logic, that is, looking for the change point signal in the secondary trend, as shown in Figure (3) case:
Figure (3) AB trend establishes that the main trend is **trend, BC is the secondary ** trend, we take the main trend AB reverse ** trend BC to enter the long, in the BC sub-level ** trend.
There is a change point in 1, because the previous ** and the change ** entity is smaller, the change ** also has a certain long upper shadow line, and it is close to the previous high point B, and the accumulated risk of the previous bulls has not been released, so such a change point signal is not reliable.
2 places, the change ** is a small medium yang line, there is a certain strength of the bulls, the previous one is a small yang line, the bulls gradually strengthened, and the position has been from the high ** to a certain extent, the risk of the early bulls accumulation has been released to a certain extent, and the comprehensive judgment of such a change point entry signal is a signal worth testing and participating.
Let's talk about the reliability of the change point signal that follows the main trend, which is not very high. In the case of Figure (3), the trend was restored after 2 changes in the inventory, and in the follow-up, we found that there were 2 changes and 1 consolidation pattern, and we analyzed them one by one.
3 is the change point in the order, which is composed of two dojis, and the change is a doji with a certain lower shadow line, and it is located above the front mid-yang line, indicating that the change signal is not strong.
There is no signal of the change point of the previous low in 4 places, but there is a new high, which belongs to the consolidation pattern in the order, as long as the low point is raised, regardless of whether it is a new high, it is still regarded as the trend of the same.
5 is a **order change point signal, but the two ** entities are smaller, compared with the previous mid-yang line, **depth is only at 1 3, so the bearish strength is very small, and there will be no depth** or reversal.
We found that the reliability of the variable inventory signal, except:The identification of its own form, as well as the trend it is in and the surrounding ** will also affect it.
Increase the winning rate of the handicap pointA signal of a change point at a key support and resistance levelThe reliability will be much better, see case (4), as shown in the figure
Figure (4) The reliability of the change point in the **trend is very low, so if you encounter the change point of the interval **, you must avoid participating or participate cautiously, but it is not impossible to participate, let's look at a case of participation in the range, as shown in Figure (5):
In Figure (5) case (5), there are multiple variable inventory signals in the interval **, but they are basically invalid, how to find the effective variable inventory point of the interval **?One is to combine the trend, the other is to combine the key levels, and of course, also consider the shape of the change point signal itself.
In this case, the upper edge of the ** range is the key resistance level, and the lower edge is the key support level, and the change point signal will be more reliable here. Figure (5) The change point signal in the breakout range, the previous ** is a false breakthrough hammer line signal, which is a strong reversal**, and is at the lower edge of the support level of the ** range, so the change point signal here will be more reliable.
In the end, the change point and the change ** are indeed a signal that can identify the accurate buying and selling point, but we can't just look at the signal to make decisions, we still have to consider the influence of its trend position and the surrounding environment** and the shape of the signal itself.
Disclaimer:This article was first published on WeChat***Rabbit Brother Youcai], the analysis and opinions in the article do not constitute any investment and trading advice, and are only used as the author's own sharing, exchange, **record, and retention. If the reader makes investment decisions after reading this article, they are all personal independent thinking behaviors and have nothing to do with the author. Trading should not be all you invest in, nor should it be the whole of your life, the market is risky, and investment needs to be cautious!