The development of patterns is inseparable from the wave theory. Any major force opening a position will leave traces, because most major players hope to buy a large amount at the bottom, so the bottom often fluctuates repeatedly, pulling up and suppressing the trend. We can find many classic forms based on experience, such as W bottom, head and shoulders bottom, triple bottom, etc. However, for ordinary investors, they will only judge based on the patterns and do not understand the principles of their formation. Naturally, they do not know how to use them flexibly and draw inferences from one example.

In the actual process, the development of patterns is inseparable from the operation of the wave theory. The process of 5 waves rising and 3 waves adjusting is the process of forming various forms, such as head and shoulders bottom and W bottom. .

Let’s take a look at the analysis process of some typical forms to facilitate better application in actual combat.

For example, we understand that the formation process of the head and shoulders bottom is as follows: the decline of stock price will have obvious volatility, and most of them will have 5 waves of decline. Then the left shoulder of the head and shoulders bottom is formed by the rebound of 4 waves of decline. . After rebounding, the stock price continues to fall in the fifth wave. If the fifth wave hits a new low and is finally confirmed as the lowest point, and then starts a new round of rise, then the right shoulder is the stock price after the first wave of rise. It is formed after a 2-wave callback. In this way, the stock price has fallen for 4 and 5 waves, and risen for 1 and 2 waves to form a head and shoulders bottom. Of course, the real head and shoulders bottom needs to be confirmed. When the 3 rising waves successfully exceed the consecutive left and right shoulders. After the line, the head and shoulders bottom is completely completed, and a new main rising wave begins immediately.

Many investors choose buying points based on this judgment.

So, if you understand the formation process, you will naturally have a deeper understanding of the head and shoulders bottom. The shoulder is formed by the lowest point of the downward wave and the beginning of the upward wave. It turns out that the head and shoulders bottom is formed by the end of the downward wave and the beginning of the upward wave. In this way, we can very clearly combine the knowledge of wave theory and general morphological judgment, and we will not mechanically apply general morphological theory to judge. For example, if a pattern is very similar to a head and shoulders bottom, but there is no obvious five-wave decline in the early stage, you should be careful at this time. It is very likely that it is a relay of decline, not the real bottom. We have to pay attention to the fact that this may not be the lowest point, it may just be an interruption of the decline, and the real bottom may not have come yet.

Through the above examples, we understand that if we want to study patterns, we must study wave theory. If we study wave theory well, we will completely understand classic patterns. Long-term research will naturally form an obvious sense of rhythm, and sticking to the rhythm is the prerequisite for happy investment. The more thoroughly you understand the form, the better you can grasp the timing of investment.