[Destructive Power] Earth-Shattering Speed! [Market Basics] What is the essence of high and low seen in Dow Theory?
Hello! I’m Lucky, a pro trader.
As I mentioned in the first series, understanding the “roots” of the market is important, and one of the elements that greatly affects those roots is the high and low prices.
This time’s topic is the very basics of the market, yet something beginners often overlook: the essence of “highs and lows.”
1. The market is made of waves after waves
The market, like sea waves, is formed by repeating up and down movements. Understanding the shape of these waves is the first step to catching the trend.
?Basic structure of waves
Highs (Higher High): Peaks formed at a higher level than the previous wave
Lows (Higher Low): Troughs formed at a higher level than the previous wave
This is the basic shape of an “uptrend.” Conversely, in a downtrend,
Lows (Lower Low): Troughs formed at a lower level than the previous wave
Highs (Lower High): Peaks formed at a lower level than the previous wave
When this structure breaks, it’s considered a sign of a trend reversal.
2. The psychology revealed by highs and lows
The market is not just numbers; it is a “psychological battle” reflecting the minds of investors. Each update of a high or low shakes the market participants’ psychology significantly.
?Psychology at a new high
Bull market: More traders buy eagerly, expecting further rises
Profit-taking: Some investors start selling near the highs
?Psychology at a new low
Bear market: Selling pressure increases, traders fear further declines
Buying support: Some investors look for a rebound near the lows
3. Capture the wave structure in an instant
“Heaven and earth speed” is a tool designed to accurately capture the structure of these high/low waves.
?Points supported by Heaven and Earth Speed
Discover the trend: Determine the continuity of highs and lows
Signs of a reversal: Detect early when a trend might break
Risk management: Avoid unnecessary entries in unfavorable conditions
4. Summary
Train your ability to read the waves!
Highs and lows are key elements that can be described as the market’s “skeleton.”
By understanding this wave structure, you can move beyond trading by simple signals to a more essential form of trading.
Heaven and Earth Speed↓↓
Next time, we’ll delve deeper into the wave structure and explain how to find actual entry points, so stay tuned!
So, let’s continue mastering the market together with “Heaven and Earth Speed”!
Lucky