Identification, Evolution, and Judgment of Market Trend Cycles

The Status of Trends and Cycles in the Market

In financial markets, trends and cycles are two different but interrelated market structures:
-Trend refers to the unidirectional movement of price (upward, downward, or sideways) over a certain period.
-Cycle refers to the complete process of market movement from low to high and back, including multiple trend phases.

Understanding trends and cycles can help us maintain direction in the broader market and avoid blind operations due to short-term fluctuations.

Classification and Characteristics of Market Trends

Trends can be classified by time scale and magnitude, with common types including:

1. Primary / Major Trend

   • Lasts longer, possibly for months or years.
   • Driving forces often come from macroeconomics, policy changes, industry reforms, etc.

2. Intermediate / Secondary Trend

   • Lasts from several weeks to several months.
   • Often represents adjustment or rebound phases within the primary trend.

3. Minor / Short-Term Trend

   • Lasts from several days to several weeks.
   • Strongly influenced by market sentiment, news, technical breakthroughs, etc.

Characteristics of trends include: trends have inertia and tend to continue once formed; trends may extend or reverse; trends include adjustment phases (pullbacks, consolidations).

Market Cycle Phase Division

A market cycle typically includes four phases:

This phase model is widely applicable to stocks, crypto assets, commodities, and various other markets. Cycles are not always symmetrical or smooth; trends may overlap or intersect in different cycles and are subject to external factors (policies, macroeconomics, liquidity, etc.).

Methods for Identifying Trends and Cycles

1. Trendlines and Channels

Draw uptrend or downtrend lines by connecting key highs or lows to assist in judging price direction. A valid breakout of the trendline may indicate a trend change.

2. Moving Average Systems

Crossovers of moving averages (e.g., 50-day, 200-day) and the deviation between price and moving averages can help judge trend strength.

3. Support/Resistance Zones

Identifying important support and resistance areas in trends can guide buying on dips or selling on rallies.

4. Volume and Volume Structure

Volume should expand in sync with an uptrend; conversely, gradually shrinking volume may signal a weakening trend.

5. Technical Indicator Assistance

Examples include MACD trend direction, ADX strength indicator, RSI trend status, etc., used to assist in judging trend continuation or weakness.

6. Multi-timeframe Trend Comparison

Confirm direction in higher timeframes (e.g., weekly/monthly) before timing operations in medium and short-term trends to avoid going against the main trend.

Operational Strategies in Different Cycles

1. Upward Primary Trend + Buy on Mid-Short Term Pullbacks
   When the primary trend is upward, mid-short term pullbacks are entry opportunities. Consider phased buying on dips with reasonable stop-losses.

2. Downward Primary Trend + Sell on Rebounds or Avoid
   If the primary trend is clearly downward, rebounds may be selling or short-selling opportunities; if risks are high, consider avoiding the market.

3. Sideways Consolidation Period
   When the trend is unclear, operations become more challenging. Reduce position sizes, opt for swing trading or range trading, and strictly control risks.

4. Trend End Phase
   Near trend peaks or bottoms, be alert to trend exhaustion signals, such as extreme price deviations from trendlines or abnormal volume patterns.

Practical Case Analysis

Suppose we observe the movement of a certain crypto asset, combining trend and cycle judgment:

• On a monthly timeframe, the asset is in an uptrend, entering a rising phase;
• On a weekly timeframe, we observe the price approaching a resistance zone with diminishing volume;
• On a daily timeframe, we see a short-term pullback, with price falling to the trendline support area;
• At this point, we might consider entering at the support area, setting a stop-loss below the trendline; if the trend continues, we can add to the position after the pullback ends; if the price breaks below the trendline, it’s seen as a trend reversal signal, and we should exit.

This case demonstrates the approach of judging trends and timing operations across different cycle levels.

Conclusion

Trends and cycles are two major manifestations of market structure. Trends reflect the direction of price movement, divided into long-term, medium-term, and short-term; cycles embody the circulation of trends, including accumulation, uptrend, distribution, and downtrend phases. Through tools such as trendlines, moving averages, volume, and support/resistance, combined with multi-timeframe analysis, trends and cycles can be effectively identified. In different cycles, investors need to adjust strategies, align with the broader trend, to optimize decision-making.