Teaching You to Trade Stocks 102: More on "All Trends Are Complete"

2008/3/6 16:10:18

If it were merely about unique decomposition, that wouldn't demonstrate the truly formidable power of this ID's theory. Because "all trends are complete" corresponds to the most special, most powerful kind of unique decomposition — the fact that seemingly lawless market movements possess such a perfect overall structure is what's truly remarkable.

The most perfect system is surely the natural numbers. Why? Because natural numbers possess numerous unique decomposition methods — for example, prime factorization. But there's an even more powerful decomposition: the unique decomposition for power series. Because of this decomposition, natural numbers have a numeral system. For instance, the unique decomposition based on powers of 2 corresponds to binary, and powers of 10 to decimal. Without this decomposition, we couldn't use numeral systems to record natural numbers.

Precisely because this decomposition is so powerful, we take it for granted, as if natural numbers having a numeral system is self-evident. In fact, this is the most remarkable aspect of the natural numbers' overall structure. And general number systems typically do not have this property.

Similarly, the recursive function provided by this ID's theory perfectly gives market movements a unique decomposition akin to a numeral system. In other words, this ID has revealed that seemingly lawless market movements possess an overall structure similar to that of natural numbers — something that completely transcends ordinary imagination. This is what's truly most remarkable.

Precisely because this ID's theory reveals that seemingly lawless market movements have such a perfect overall pattern, all the subsequent operational possibilities follow from this. This is what's truly critical about "all trends are complete."

Therefore, levels are extremely crucial in this ID's theory. Why? Because this ID's recursive function has levels, and these levels increase progressively. So if you don't understand levels, you fundamentally don't understand this ID's theory.

So what powerful conclusions does such an overall structure yield? There are too many things that can be derived from this. Let me just mention one: the application of the nested interval method. If market movements didn't have the overall structure revealed by this ID, then nested intervals wouldn't exist and would have no operational significance. Therefore, the nested interval method is an important application of "all trends are complete." With nested intervals, precise positioning of buy and sell points becomes possible. In other words, the existence of "all trends are complete" leads to the ability to precisely locate buy and sell points — this is obviously the most powerful approach in trading.

From 1-minute all the way to yearly, there are 8 levels. Actually, the names of these levels can be chosen arbitrarily — it's just that this convention matches common habits. Otherwise, calling them Level 1, Level 2, etc. could easily cause confusion.

Of course, with the addition of line segments and strokes, an even finer decomposition is possible, but generally this isn't necessary.

Any market movement can be uniquely expressed through the decomposition formed by these levels. But generally speaking, for ordinary trading, there's no need to push every decomposition up to yearly, quarterly, or monthly levels, because these levels typically don't change for years at a time. Look — from the 6124-point peak, N months have passed, and we're still operating within the 30-minute level. So generally speaking, the decomposition of three levels — 1-minute, 5-minute, and 30-minute — is sufficient to handle all market movements. Of course, for larger capital, you might consider adding the daily level.

That is to say, any market movement can be uniquely expressed in the form a1A1 + a5A5 + a30A30. And the existence of levels leads to an inevitable conclusion: any change at a higher level must first begin at a lower level. For example, it's absolutely impossible for the 5-minute to transition from downtrend to uptrend while the 1-minute is still in a downward segment. With such an excellent structure, complete classification of trend operations becomes possible.

Complete classification is actually an extremely powerful substantive property. Study a bit of modern mathematics and you'll know that the vast majority of systems don't necessarily permit complete classification. And to study a system, the most critical task is to find some means of achieving complete classification — in professional terms, to possess a certain equivalence relation.

Because of "all trends are complete," market movements can be completely classified, and all classifications have clear boundaries. This way, any market movement becomes controllable. This controllability doesn't require anyone's prediction or intervention — it manifests directly in the present moment. You only need to act according to this present-moment display, following your own operating principles.

Note: complete classification is level-based and has clear price-level boundaries. It's not some crude and meaningless concept of "up, down, or flat." In other words, this ID's theory is entirely quantitative, and therefore precisely defined — there is no ambiguity whatsoever within it.

So, understanding all of the above gives you a general framework, so you won't get lost within the theory.

Replies

缠中说禅 2008/3/7 13:07:28
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缠中说禅 2008/3/7 13:07:59
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