EagleTrader: Are you always trying to buy the bottom and get the top? This is the truth that the trend will not reverse easily.

In the trading market, many traders will encounter a similar confusion: after the price rises continuously, they always instinctively feel that
“It’s time to fall after it has risen so much”, so I rashly go short; when the market continues to fall, I can’t help but guess the bottom and think about buying the bottom.

But the reality is often that the rising market can continue to rise, and the falling market may also fall all the way.

Why does this happen? In the technical analysis system, the classic Dow Theory has already given the answer.

Why does the trend continue?

In many trading textbooks, the Dow Theory is often simply summarized as: Once a trend is formed, it will continue to run until a reversal signal appears.

But if we only stay at this sentence, it is easy to have questions: Why does the market not turn around at any time? Where does the continuity of the trend come from?

In fact, the core reason why the trend can continue is the capital structure and emotional transmission of the market. The two interact with each other to jointly promote the market to develop in the established direction.

First of all, from the perspective of capital structure, the entry and exit of large funds has always been a gradual process.

It is difficult for institutional funds or large trading accounts to complete a full position or exit at a single price point. When some funds enter the market to push up the price, more funds will gradually follow up, forming a continuous buying order;

Similarly, when the market falls, the withdrawal of funds is not completed at one time, but is accompanied by continuous lightening and selling. This kind of capital behavior directly causes the price trend to show the characteristics of phased continuation.

Emotion is an important driver of trend continuation

In addition to capital structure, the transmission of market sentiment is the key to trend continuation. In a rising market, traders who enter the market early continue to make profits. As prices continue to reach highs, more and more investors begin to pay attention and join, eventually forming a positive cycle:

Price rises → market attention increases → new funds enter → prices continue to rise

In a downtrend, sentiment conduction leads to a reverse cycle:

Price falls → market panic intensifies → investors focus on selling → Prices fell further

It can be seen that the continuous rise and fall of the market is often not driven by a single news, but the result of the two-way resonance of funds and emotions.

Why do many traders always trade against the trend?

Although trend continuation is the norm in the market, most ordinary traders are still accustomed to repeatedly predicting tops and bottoms. The core reason is that intuition dominates trading judgment.

After prices continued to rise, I instinctively felt that “the price has risen too much., it’s time to fall”; the market continues to fall, and I think subjectively “It’s gone too far, it’s time to rebound.”

But the market will never automatically reverse due to the distance of price movement. A true trend reversal must be accompanied by clear structural changes or the intervention of new financial forces. Without these core signals, the trend will continue to develop in the original direction.

Why don’t professional traders predict the market. Market, only care about trends?

The core trading logic of professional traders is always to follow the trend. This is not a subjective choice, but respect for the laws of the market. There are two key reasons behind it:

The core of trading is not to accurately capture the top and bottom, but to identify and follow the main trend of the current market and seize the main fluctuations of the market. Motivation opportunities are far more valuable than struggling with turning points;

Secondly, this is the best solution to deal with market uncertainty. The success rate of predicting the top and bottom is extremely low, and once the judgment is wrong, it can easily lead to a large capital retracement; following the confirmed trend and complying with the market inertia, the winning rate and transaction stability will be greatly improved.

In a proprietary trading environment, the importance of this logic will be infinitely magnified. Traders need to achieve continuous trading under strict risk control rules. Frequently predicting tops and bottoms will expose the account to extremely high retracement risks. Following the trend and waiting for structural confirmation are the core principles for maintaining transaction stability.

This is also what many traders participate in. EagleTrader
In the process of self-operated trading examination, the core trading ideas gradually formed: from blindly predicting the market, to rational understanding of the market structure, and finally to scientific and trend trading.