First, the basic principle of wave theory
According to wave theory, the price trend of the market can be divided into five rising waves (marked as 1, 2, 3, 4, 5) and three falling waves (marked as A, B and C). Rising waves represent the upward trend of the market, while falling waves represent the downward trend of the market. There is a certain proportional relationship and law between these waves, and investors can predict the future market changes by observing and analyzing the shapes and trends of the waves.
Second, the classification and characteristics of waves
According to wave theory, waves can be divided into two categories: main waves and secondary waves. The dominant wave refers to the main trend of the market, which usually consists of five rising waves and three falling waves. The secondary wave is the internal wave of the main wave, which usually consists of three rising waves and two falling waves. The characteristics of waves include peak, trough, fluctuation amplitude and time period.
Third, the application skills of wave theory
The application of wave theory needs some skills and experience. Investors need to learn to identify and mark the shape and trend of waves. Investors need to learn to analyze the proportional relationship and laws between waves to determine the dominant trend of the market and the direction of the second wave. Investors can also use other technical indicators and tools to help analyze and judge market trends.
Fourth, the advantages and disadvantages of wave theory
Wave theory has certain advantages and disadvantages. Its advantage is that it can provide more accurate market forecasts and trading signals, and help investors catch the ups and downs of the market. Its deficiency lies in that the identification and analysis of waves require higher technical level and experience, and the requirements for investors are higher. Wave theory also has certain subjectivity and limitations, and investors need to consider it comprehensively with other analysis methods and market information.
Summary:
Wave theory is a technical analysis method used to predict market trends and price changes. Based on the natural laws of the market and the psychological behavior of investors, it predicts the future market changes by observing and analyzing the shape and trend of waves. Investors can improve their market analysis and trading ability by learning and applying the basic principles of wave theory, wave classification and characteristics, application skills, advantages and disadvantages, so as to obtain more return on investment. Wave theory requires investors' technical level and experience, so investors should comprehensively consider other analysis methods and market information to reduce risks and increase the probability of successful investment.