A round of market development begins with cost conversion and ends with cost conversion. What is cost conversion? Figuratively speaking, cost conversion refers to the process of moving chips from one price range to another; It is not just about the conversion of stock prices, but more importantly, the conversion of the number of chips held.

The trend of stocks reflects the changes in stock prices on the surface, but its inherent essence reflects the conversion of holding costs. To understand this, it is necessary to conduct a process analysis of a market trend.

It can be said that the ups and downs of a market are closely related to the behavior of the market makers. The most essential manifestation of the behavior of market makers is the control of the holding cost of stocks. Just like commodity trading, buying at a low price and selling at a high price generate profits. The behavior of market makers has similarities with commodity trading, but it is by no means simply similar; It has a richer connotation than buying low and selling high in commodity trading, and it is a highly reflective of the behavior of market makers and the market.

A market cycle mainly consists of three stages: the fundraising stage, the rally stage, and the distribution stage. The main task of the fundraising stage is to buy stocks in large quantities at low levels. Whether the fundraising is sufficient and the amount of the banker's position have extremely important significance for their trading: firstly, the position determines their profit margin; The more chips, the greater the profit realization; Secondly, the position size determines its degree of control over the market; The more chips attracted, the less market chips there are, and the stronger the market maker's control over the stock. At the same time, during the stage of attracting funds, there is often a process of washing out the market, forcing those who were trapped at high levels in the previous round to continuously cut out, so that the market makers can attract funds at low levels.

In fact, the process of the banker attracting chips is a process of exchanging chips; In this process, the banker is the buyer and the shareholder is the seller. Only when the chip turnover is fully completed at a low level, will the fundraising stage end and the conditions for launching an upward trend become mature. The market maker's fundraising area is the cost area for holding stocks.

The main task of the pull-up phase is to detach the stock price from the cost zone of the market maker's fundraising and open up profit margins. During this process, the banker used some chips to suppress the trading, while also accepting the selling pressure chips, but most of their chips remained in the suction area, waiting to be sold at a high level. During the upward trend, some investors chased after the rise, while others took profits; For market makers with good trading skills, if they cooperate with the overall trend, they only need to light a fire, and the lifting work is mainly completed by investors themselves; During this period, the market makers mainly use their ability to control the market to regulate the pace of upward movement. During the upward phase, transactions are exceptionally active, chips are rapidly changing hands, and the cost distribution varies among different price levels.

The main task of the distribution stage is to sell the holding chips and achieve trading profits. The stock price has risen out of the cost zone and reached the profit zone of the market maker, increasing the possibility of the market maker selling at a high level; With sufficient turnover at high positions, the low position chips before the rally are moved up to high positions. When the low-level chip moving work is completed, the dealer's shipment work is also declared complete; A downward trend followed suit.

In the process of a market trend, two concepts should be fully emphasized: sufficient turnover at low levels and sufficient turnover at high levels. Fully changing hands at a low position is a sign of the completion of the fundraising stage; Full turnover at high positions is a sign of completion of the distribution phase. They are sufficient and necessary conditions for promotion and distribution. The so-called full turnover refers to the high concentration of transactions in a certain price range, so that the chips scattered in various price levels are fully concentrated in a main price range.

In short, any round of situation is a transition from high-level to low-level, and then from low-level to high-level; The process of cost conversion is not only a process of realizing profits, but also a process of cutting losses, thus forming the entire history of stock trends.

There is a stock proverb that goes, 'A bear trap is a bull's pie.'. The key skill to winning in the stock market is to correctly judge and identify whether there is a bearish trap before a stock rises. So, what is the bear trap? How should investors identify it?

Definition of Short Trap:

When the stock price is in a low area, there is a sudden illusion of a downward breakthrough, such as breaking through the support of long-term moving averages, accompanied by various negative news. Due to concerns about another market downturn, many investors sold their stocks in panic. Subsequently, the market did not fall but instead rose, and a bull market began again. As the stock price rises, transactions continue to increase, and the stock index breaks through important resistance lines. At this point, the downward breakthrough trend that appeared earlier can be seen as a trap that lures bears to short, known as the bear trap.

The identification and judgment of short traps can be comprehensively analyzed and judged from five aspects: news, funds, macro fundamentals, technical analysis, and market sentiment

1. From the perspective of message analysis

The market often takes advantage of its promotional advantages to create a short selling atmosphere. Therefore, when investors encounter continuous negative news in the market, they should be extra careful, because it is precisely in the situation where negative news is flying everywhere that the main funds can more conveniently build positions.

2. Analysis of Trading Volume

As the stock price continues to decline, the volume of stocks is constantly shrinking irregularly, and sometimes there are even situations where there are no empty or sharp drops in the market. The trading of individual stocks is not active during the market, giving investors a feeling that the bearish trend is far away. It is in this atmosphere that the main force easily builds positions at low prices, thus constructing a bearish trap.

3. From a macro fundamental analysis

Investors need to have a comprehensive understanding of the policy and macro factors that affect the strength of the market. If the market does not have particularly substantial bearish sentiment, but the stock price continues to plummet, it is easy to form a bearish trap at this time.

4. From the perspective of technical form analysis

The performance of the bearish trap on the K-line trend is often characterized by several consecutive long bearish lines with sharp drops, falling below various important strong support levels, and sometimes even accompanied by a downward gap, causing market panic to spread.

5. Analysis from the perspective of market popularity

Due to the long-term decline in the market, a heavy trapped market has formed, and sentiment has been continuously depleted. This is often the time when market sentiment is at its lowest, which precisely indicates that it is not far from the true bottom. It is worth noting that after experiencing a long-term decline, the systemic risk of the index is already very small, and we should not be overly bearish on the future. We should actively seek opportunities to build positions.