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Teaching You to Trade Stocks 83: The Different Psychological Significance of Stroke-to-Line Segment vs. Line Segment-to-Minimum Hub Structures (1)

2007/9/26 21:28:05

A most basic question: why can't strokes form the minimum hub? Actually, this isn't really a question. Why? Because in essence, we could design such a program — using strokes as the building blocks for the minimum hub — but the system constructed this way would have extremely poor stability.

As is well known, a stroke is based on top and bottom fractals, and some momentary transactions can be enough to affect the structure. For example, if someone suddenly makes an erroneous order, or someone feeds a rat trading account, then the entire day's trend analysis changes completely. However, when line segments form the minimum hub, this problem doesn't exist. Why? A line segment won't be changed by an occasional erroneous stroke — in other words, line segments are less affected by accidental factors. Just think about how difficult it is to destroy a line segment, and you'll understand this point.

From a psychological perspective, accidental factors are allowed to occur. As long as they're not reconfirmed, it proves that the accidental factor had no major impact on the original psychological combined force, which in turn confirms the effectiveness of that combined force. Therefore, the destruction of a line segment itself actually reflects a subtle change in psychological structure. The introduction of characteristic sequence fractals is essentially meant to delineate these changes in psychological structure. Just like ordinary fractals, formation requires three confirmations. Characteristic sequence fractals are essentially the same — such confirmations greatly increase their effectiveness. The building blocks for the minimum hub constructed from these are therefore appropriate.

If three K-lines of jostling can determine a stroke's turning point, then a line segment's destruction requires three characteristic sequence fractal jostlings. This gives both buyers and sellers sufficient time to react, ensuring that the combined-force trace exhibited possesses a certain degree of continuity. And since a line segment consists of at least three strokes, the new line segment after a turning point similarly allows the combined force to be fully expressed. Comparing these two opposite-direction line segments, the psychological and strength contrast between buyers and sellers over the corresponding time period becomes crystal clear.

More importantly, the two methods of line segment destruction carry very different psychological implications. In the first method, the first stroke's attack directly penetrates the last strike from the previous segment, proving that the counterattack force is powerful. The next returning stroke represents yet another strike by the original direction's force, but the counterattack force withstands it and counterattacks again to form a characteristic sequence fractal. This proves that this counterattack has at least created an opportunity for a pause. The worst-case scenario is that both sides cool down slightly and choose a new direction. And this precisely constitutes the psychological foundation for the formation of a minimum hub.

A hub is essentially a process of repeated contest between buyers and sellers. The simpler the hub, the more powerful one side is. The complexity of a hub is a very important basis for examining the market's ultimate direction. After a super-complex hub, even if one side wins, the subsequent trend is frequently marked by repeated fluctuations.

Moreover, within the same trend, the complexity and form of adjacent hubs often differ. Why? People always try to get ahead of the curve, and getting ahead often means copying the most recent template. This effectively adds an anticipatory variable to the combined forces of buying and selling, causing the entire structure to change. This is a very important principle — the so-called "you can never step into the same river twice" is essentially caused by human greed, anger, delusion, doubt, and arrogance.

As for the second method of line segment destruction, it essentially trades time for space. The counterattack force at the beginning is very weak and needs to accumulate slowly. On one hand, this represents the original direction's force being very strong. On the other hand, close attention must be paid to whether a domino effect will form — that is, the initial counterattack force is very small but can spread rapidly. This often proves that the market's forces in the original direction have structural homogeneity — the slightest disturbance causes a collective reversal. This is frequently seen in speculative instruments, where a small M-top can trigger a massive plunge. Homogeneity, for general instruments, often implies a high degree of market maker control.

Some stocks with violent surges or plunges are often triggered by even a 1-minute small top fractal that sparks a massive plunge or massive rebound. The reason is precisely this domino effect caused by the homogeneity of forces. Generally speaking, with this second type of line segment destruction, once a domino effect occurs, the price will at least return to within the range of the previous high or low point — this is the V-shaped pattern that occurs at market tops and bottoms.

The domino effect triggered by the homogeneity of forces essentially manifests as so-called bulls killing bulls and bears killing bears. Especially after major trends, when market forces are completely one-sided — if a sudden acceleration occurs at this point, once it reverses, the classic bulls-killing-bulls or bears-killing-bears phenomenon occurs.

A traitor, before becoming a traitor, was necessarily a comrade — perhaps even a leader among comrades. And the most dangerous enemy always comes from the betrayal of so-called comrades who once shared the same aspirations. An internal collapse within the same camp is the most lethal. Whether bulls or bears, when they die, looking up along that blood-dripping blade, those eyes that meet theirs are always the most familiar ones.