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Understand the trend, buy the right stock.

These two sentences are often on the tip of the tongue.

In fact, both sentences are equally important.

The first sentence determines the probability of you making money, and the second sentence determines how much money you make.

If you delve into it.

Buying the right stock requires not only strength but also a bit of luck.

But understanding the trend only requires ability, without the need for any luck.

The vast majority of retail investors can theoretically understand the trend, but some are not willing to admit it.

For example, a stock has obviously entered a downward channel and trend.

But retail investors always think it may reverse the downturn in the short term and usher in a new round of rises.The expectations within our hearts and the actual situation often have a significant discrepancy. This leads to a turning a blind eye to the established trends, or even more metaphorically, plugging one's ears while stealing a bell, showing disrespect to the market. The result is that a small number of stocks do indeed reverse their trend and move upwards due to certain circumstances. However, most stocks will follow the trend all the way down, ultimately leading to heavy losses.

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Trends themselves are categorized into different levels, and the difficulty of changing them varies with each level. Often, some major trends are hard to be driven and changed by external forces. This is somewhat similar to the housing market in recent years, where even with many policies actively promoting it, the trend remains unshaken. It's also like the marriage rate and birth rate in recent years, which are being guided and encouraged, but there is no sign of a trend change.

Trends require a significant external force to change. It is precisely because of this that the effectiveness of trends is very strong, and the larger the level of the trend, the stronger its effectiveness.In observing trends, we must first identify the level of the trend.

A simple distinction is that there are three levels of trends.

The first category is the irreversible large-scale trend.

Large-scale trends are the general trend.

The general trend is relatively easy to understand, meaning that the right timing, favorable conditions, and people's support all exist, and it is irreversible for a period of time.

For example, the development of China's economy as a whole is an irreversible trend.

The expansion of the entire A-share market is an irreversible trend, with more and more listed companies, which is an irreversible trend.

Other irreversible trends are all written in cycles.

For example, at the beginning of market development, it is industry, infrastructure, and real estate; the next stage is big consumption, big finance, and big medicine; and in the later stage, it is big technology.These trends are essentially written in the historical stages.

Major trends are often guided by policies and are also the inevitable outcome of the times.

There are some stocks, although they fluctuate, but you will find that the overall trend is upward.

The Shanghai Composite Index, although there are various issues, but each time the stage is low, it is also moving upward, and the overall trend is still good.

Most people can't grasp this big trend, because the cycle is relatively long, and many people in the investment circle are impatient.

This is like, very few people can really grasp the big bull stocks like Maotai, most of them get off halfway.

The second category, the wave trend that appears in the stage.

The stage trend generally refers to the trend of 1-2 years.

What we call the stage, generally refers to the trend above the monthly line level.

This trend, most also need to conform to the times, and then there will be an outbreak at a certain time node.For example, the new energy sector that was very popular in the past two years, and the chip semiconductor industry a year before that.

Looking back from the present, these are all phase-specific trends, not the real big trends.

Many sectors that have risen have already fallen.

The reason why these trends exist in the form of large waves is due to the dual factors of cycles and capital.

The so-called cycle refers to the large cycle of an industry's prosperity, which brings a large number of orders and performance growth at the policy level, technical level, market level, and consumer level.

As for capital, it is actually a large amount of capital speculating on the stocks of these listed companies, speculating on this sector, and promoting the formation of the trend.

The reason why you have to get on the bus during each adjustment when the trend is rising is because there is a continuous flow of capital in the trend, and there are people buying every time it falls.

On the contrary, when the downtrend comes, there are funds withdrawing every time there is a rebound, and the downtrend is also unbreakable.

This kind of trend, observed from the monthly level, is relatively simple.

There are also more indicators for observation, using moving averages, using MACD, some simple indicators can be identified.The third category, rapidly emerging short-term trends.

Short-term trends are mostly derived from speculation, and the time cycle is relatively short.

There are two types of short-term trends, one is at the daily level, and the other is at the weekly level.

But if you have to summarize, most of them are at the weekly level.

In the T+1 trading market, the daily level is hard to be called a trend, it's just a fleeting market.

For example, a pulse-like rise occurred in 1-2 days, which cannot form a so-called trend.

Capital entered the market the day before, and retreated the next day, how can it be called a trend?

Most of the short-term stocks we talk about, their trends are also reflected at the weekly level or above, the market phase is short for 1-2 weeks, and long for several months.

In fact, short-term trends are standard market conditions built up by money.

Regardless of whether the short-term is due to the outbreak of the theme or policy support, it is a short-term behavior.The transformation of short-term trends into medium to long-term trends requires a process. Once the trend is established, it should first be viewed in the short term.

The greatest demand for short-term trends, or the market's appearance, is to increase trading volume, and ideally, the volume can be sustained.

Most short-term stocks end their market movements in a reduction of volume.

The observation indicators for short-term trends can be moving averages, but more often, it is the naked relationship between volume and price.

When the relationship between volume and price is in place, the short-term trend is formed. Moving averages and some indicators are, in essence, auxiliary indicators.

The profit effect is the core of the short-term trend, and it is crucial not to put the cart before the horse.

Understanding the trend is actually quite simple. Some people look at the fundamentals, while others look at the capital side.

The essence of the trend is momentum, which is built up with capital.

Good performance can create a major momentum.

Abundant capital can create a short-term momentum.Since you have taken advantage of the momentum, you must learn to act in accordance with the trend, and never expect to make money against the trend.

Ordinary people need to learn to think in terms of trends, to make big trends, to earn big money, and it's simple money.

Those who tell you every day how to make money with short-term plays, in fact, most of the time, they haven't made money either.

Otherwise, they would have become rich long ago, and there would be no time to spread the word everywhere.

The great way is simple, there must be no mistake, the money of the trend is easy to earn, just see and recognize.

In the stock market, be an investor who acts in accordance with the trend.