Teaching You to Trade Stocks 84: Some Issues That Must Be Noted in This ID's Theory

2007/10/7 16:09:06

Back in business — looks like quite a few lessons were owed during the hiatus. Let me catch up today. This morning I posted the meditation lesson 11 that was written before the National Day holiday, and now I'll finish and post the partially-written stock lesson 84 from before the holiday.

Stock trends are ultimately unrepeatable, but the exquisite beauty of stock trends lies in the fact that unrepeatable trends, without exception, replicate self-isomorphic structures. The replication of these self-isomorphic structures is absolute, and can be absolutely proven using this ID's theory without needing to invoke any a priori mathematical theories such as fractals. The absolute derivability of the absolute replication of these isomorphic structures is the crux of this ID's theory, and one of this ID's theory's most brilliant insights into the complex and elusive stock market. Note: "self-isomorphic structures" — previously, less precise terms like "self-similar structures" were used, which easily gets confused with mathematical fractals and terminology in theories constructed using such a priori theory. Henceforth, the unified term shall be "self-isomorphic structures."

It is precisely because self-isomorphic structures exist that stock trends can be absolutely analyzed through technique. Any effective technical analysis is essentially a subset of this ID's theory — this ID has yet to see any effective stock trading program that falls outside this ID's theory.

Recently, many people seem to be citing various books, saying this or that is consistent with this ID's work. In fact, this is like saying that many people knew the Pythagorean theorem before Euclid or independently of him — but is that Euclidean geometry? Moreover, more importantly, this ID has still not seen any single book that reaches even the level of the Pythagorean theorem, let alone the Euclidean geometry that is this ID's theory. This ID suggests that besides studying this ID's theory, you should definitely read widely from others — only through comparison will you understand. This ID's theory not only represents the grand synthesis of all technical analysis theories, but more importantly, this ID's theory is constructed on a completely different intellectual framework. It's like how both ancient China and India had impressive geometry, but what was truly logicized, axiomatized, systematized, and theorized was Euclid's — a completely different mathematical approach. If you don't understand this, you've certainly studied in vain.

So, in learning this ID's theory, one crucial point is to identify the specific position of all other technical analysis and trading programs within this ID's theoretical domain. Since this ID's theory has an absolute perspective on all technical analysis and trading programs, it can absolutely reveal the strengths, weaknesses, and flaws of all analyses and programs.

Note: you may discover that some conclusions in this ID's theory seem similar to those of other theories. This precisely demonstrates the scope of this ID's theory's coverage. For example, this ID's theory can explain every detail and shortcoming of Wave Theory, but the reverse is impossible — because this ID's theory is a broader theory, and Wave Theory is merely an immature theory with enormous flaws.

Similarly, other people's theories may also define concepts similar to fractals through K-line combinations. But those definitions, like general K-line analysis, are derived through empirical induction. This ID's definition of fractals, however, originates from a complete classification of K-line combinations — it is a purely theoretical derivation. It is precisely for this reason that this ID's theory, compared to any other theory, possesses absoluteness and comprehensiveness. This will be gradually revealed in future lessons.

The unrepeatable nature of trends and the absolute replication of self-isomorphic structures and the purely logical derivation of the theory — these constitute the three fundamental objective pillars of this ID's theoretical perspective. Without a deep understanding of this, genuine comprehension is very difficult.

The unrepeatable nature of trends dictates that all judgments must and inevitably are not absolutely predictable. The absolute replication of self-isomorphic structures dictates that all judgments are determinable and have absolute operability. The purely logical derivation of the theory proves the absolute validity of its conclusions.

This ID's theory is the first time in human history that the uniqueness of trend decomposition has been absolutely proven through 100% theoretical derivation. This should be clear from the proofs of uniqueness for strokes, line segments, and other decompositions above. What trading theory in the world is constructed through such absolute reasoning? Obviously, none — and this is where this ID's theory derives its most powerful force. The first two objective points would be nonsense without this third point.

In fact, these three points are relevant far beyond just stock trends. Those who truly understand will find that they have the same significance for your life and social operations. Every person's life, the world's changes, and so forth — essentially, they cannot escape the absolute unrepeatability of trends, the absolute replication of self-isomorphic structures, and the absolute deducibility of the corresponding invariant collective karma.

What is revolution? It is breaking the absolute replication of certain self-isomorphic structures and the absolute deducibility of the corresponding invariant collective karma. Do you understand why this ID says "Leninist socialism is a nationalism-based strategic misreading, an anti-capitalist capitalist process"? It's because essentially, the self-isomorphic structure with absolute replication inherent to capitalism has never been broken. This self-isomorphic structure is like a plague — it must globalize, must unify everything into a single swindling machine. This is its invariant collective karma. From this, it's not hard to understand the significance of Marx's insight that socialism must necessarily be a global event. Before capitalism itself has fully globalized, any talk of socialism is certainly not socialism in the Marxist sense.

Seeing capitalism's inevitable collapse is essentially the same as seeing the inevitable completion of an uptrend on the daily chart — fundamentally there's no difference. Marx, like this ID, slaughters both bulls and bears. Anti-Marxists are like those frantic bulls, while anti-capitalists are like those frantic bears. The combined force between them constitutes capitalism's trend itself. This trend may continuously shift hubs upward, but the end of this trend can be precisely determined — the criterion is divergence, the divergence of the entire social macro-structure. Right now, capitalism is still in full development amid globalization — where's any sign of divergence?

But, as this ID has said, you can slaughter both bulls and bears to ambush any trend. Capitalism's upswing can similarly be ambushed. More on this topic will come gradually in the "Defending Marx" series.

The key to any ambush is to strengthen yourself by slaughtering both bulls and bears. Anyone with single-track thinking will never understand this principle. Of course, there's no need to let them understand — otherwise, without single-track thinkers, where would you find targets for slaughter? Bulls and bears alike are ultimately just pig heads waiting to be slaughtered.

Slaughtering both bulls and bears is not based on personal preference, but rather being present within the combined force of the trend like a zero vector. A zero vector, no matter how much you add, won't change the combined force of the trend one bit. Only then can you truly sense the market's combined force itself, sense its turning points, sense its fractures, and strike in that flash of lightning — flowing like wind over water, streaking like lightning across the sky. Not thinking long, not thinking short, floating like a zero vector with the combined force, riding the waves — only then can you ultimately dominate everything and slaughter both bulls and bears.

So ultimately, what's being compared is the person themselves. It's like when everyone plays the Dugu Nine Swords — against those so-called Five Mountains Sword Alliance players, of course you take them down one by one. But when everyone is playing Dugu Nine Swords, then it comes down to the person. One chapter of this ID's theory is about continuous cultivation — what level you can ultimately reach, whether you play with small capital or wage large campaigns, can only be related to this. But this still isn't enough — mere so-called body-mind cultivation is just activity in a ghost cave. Your body-mind is not your body-mind; therefore it is your body-mind. Starting from here, one can finally take another step beyond the hundred-foot pole.

Seeing divergence and turning points in trends is merely first-level stuff. The day you can see the divergence and turning points in socioeconomic, political, and other structures — that's the higher-level stuff.

Since the popularity of structuralism and deconstructionist philosophy, viewing things from a structural perspective has become a basic mode of thinking. But the key problem is that many so-called structural approaches are merely inductive results — they possess neither theoretical systematization nor validity.

Here, this ID must emphasize once more: fractals (分型) and fractals (分形) are fundamentally different. The fractals this ID speaks of are built on a pure classification of K-line combinations. Anything differing from this pure classification is necessarily wrong — this must be clearly understood. As for mathematical fractals, they may indeed represent a type of structure, but such structures are essentially inductive — and therefore necessarily flawed and non-unique in their classification. This is fundamentally different from the absolute conclusions derived from a complete classification basis.

Second, fractals are merely a starting procedure for the recursive definitions of hubs and trend levels. One could even say that fractals are not strictly necessary within this ID's theory. Their purpose is merely to provide the initial part for the recursive definition of hubs and such. They can be entirely replaced by other definitions. For example, we could use closing prices to define top fractal and bottom fractal structures, or use trading volume to provide the corresponding recursive starting components — as long as the uniqueness of decomposition can be guaranteed, it works.

This ID's definitions of hubs and such have actually never changed, because the key to hub definition lies in the recursiveness of the definition. A typical recursive definition consists of two parts: 1. f1(a0) = a1; 2. f2(an) = an+1. Regarding the hub process rules in the second part — those have never changed at all. As for the first part, you can actually set it to anything without affecting the recursiveness of the hub definition. Moreover, anyone with a bit of mathematical common sense knows that before f1(a0) = a1, no recursiveness is needed — that is, the f1 and f2 between parts one and two can be two entirely different functions.

Some people still can't figure out hubs because they can never understand this point. For example, you can use functions like fractals and line segments to construct the lowest-level hubs and trend types — that is, a1 in part one. Then in part two — above the lowest level — you can use a completely different set of rules. That is, having an f2 completely different from f1. This problem is really too simple — anyone with a bit of mathematical common sense wouldn't question it. So this issue won't be discussed again.

As for the auxiliary identification using MACD, this has been stated many times. The key isn't MACD — it's the decomposition of trends. That's what's crucial. If MACD were truly useful on its own, then just using MACD alone would suffice. If you haven't even resolved this question, then you've studied the previous lessons for nothing.

Also, I must knock down another erroneous idea. Levels are essentially unrelated to time — levels are not "time structures." Levels are merely a classification method that self-generates according to this ID's rules. So-called time structures are essentially the same as the K-line time-period selection in charting software. A trend type below the lowest level can exist for 100 years without growing into a higher level. Levels and time are essentially not closely related. The key to levels is the set of rules that this ID designed. Levels inherently make no absolute promises to any time structure. Why? Because there is no absolute theoretical derivation that can guarantee this. A level gets destroyed because it gets destroyed — that's all there is to it. It's not because of any time factor that a structure gets destroyed.

There's an even bigger misunderstanding: some people see this ID talking about "the present moment" all day and conclude that "the present moment" is the most important thing. This is an absolute misunderstanding. The reason "the present moment" is repeatedly brought up is simply because people's desire to predict is too deeply ingrained — it's merely a tool for breaking that habit. Being able to be in the present moment is only the first step; what truly needs to be broken is the present moment itself. Nowadays, many who practice superficial Zen chatter about "living in the present moment." Yet "the past mind cannot be grasped, the present mind cannot be grasped, the future mind cannot be grasped" — so what present moment is there to grasp?

After learning this ID's theory, when you look at other theories, you can more clearly see their flaws and problems. Therefore, reading widely across different theories not only doesn't hinder the study of this ID's theory, but helps you understand the fundamental reasons why this ID's theory differs from all others. This ID noticed someone mentioning Trading Chaos and Securities New Space-Time. So here's a new assignment: if you have time, study them well, then use the perspective of this ID's theory to discover the major problems in their theories and the fatal flaws in their operating procedures. If you can complete this assignment, your understanding of this ID's theory will deepen further.

More importantly, why learn about other theories? Because the behavioral patterns of those theories' practitioners will constitute our future hunting targets. The flaws in their operating patterns are the best weapons for hunting them in the future. This is like learning the Dugu Nine Swords — you must learn to spot the weaknesses in every school's techniques. This too is an extremely critical step in studying this ID's theory.