In trading, the core of the concept ‘trend > structure > levels’ lies in **the priority management of risk and return**, reflecting the weight of different levels of market information on trading decisions. The following is a detailed explanation:
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One, Trend (maximum weight): The market's overall direction
Why is it the most important?
1. Market momentum concentration
The trend represents the medium to long-term consensus of market funds (the direction of institutions and major funds). Trend-following trading means ‘borrowing the force of the trend’, resulting in a naturally higher success rate.
For example: In a bull market, even if bought at a high point, the continuation of the trend can lead to profit; in a bear market, seizing rebounds is like ‘catching a flying knife with empty hands.’
2. Risk controllability
Setting stop-losses for counter-trend trading is difficult (the trend's strength may breach all supports/resistances), while stop-losses for trend-following trades have clear logic (such as breaking trend lines).
Data evidence: Trend-following strategies are effective in the long term (such as the Turtle Trading rules), essentially ‘cutting losses short and letting profits run.’
3. Time value
The stability of trend cycles (weekly/monthly) is far greater than short-term fluctuations. The essence of trading is ‘exchanging time for space’, and trends provide the highest time return ratio.
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Two, Structure (secondary weight): Key pivots in the trend
Why is it secondary to the trend?
1. The trend's ‘gas station’
Structure (such as consolidation patterns, key support and resistance areas) is a pause point for the trend, not a reversal point. It helps confirm the strength of the trend:
- Horizontal structures in an upward trend often indicate a buildup before a breakthrough;
- Breaking key structures (such as head and shoulders) indicates a possible trend reversal.
2. Anchor points for trading rhythm
Structure provides clear entry/additional position points (such as retracing to the trend line), and stop-loss points (the lower edge of the structure), achieving a ‘high risk-reward ratio’ strategy.
For example: Buy at the lower edge of an upward channel, stop loss upon break, with controllable space; chase the rise upon breaking the upper edge of the channel, with clear targets.
3. Validation of market sentiment
The process of structure formation reflects the tug-of-war between bulls and bears. If the price rapidly reverses at a key structure, it indicates that the trend's strength still dominates the market.
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Three, Levels (final weight): The trap of precision
Why is it least important?
1. Randomness interference
Short-term levels are greatly influenced by noise (high-frequency algorithms, news disturbances). Pursuing ‘precise levels’ can easily lead to over-optimization, neglecting the larger picture.
Case: Failing to execute an order at a cheaper price by 1 point led to missing out on the subsequent 100-point movement.
2. Vague correctness > Precise error
When the trend and structure are clear, point deviations (such as buying at a secondary low) do not affect the essence of profit; however, in a counter-trend situation, even buying at the lowest point may lead to stop-loss due to trend continuation.
3. Risk-reward ratio thinking
Successful trading relies on ‘high risk-reward ratio’ rather than ‘high win rate’. Overemphasis on levels often leads to holding onto winning trades (fearing drawdowns) and stubbornly enduring losing trades (hoping to break even).
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Four, Hierarchical application in real combat
1. Follow the trend:
- Use weekly charts to judge bull/bear/sideways markets, deciding ‘to go long, go short, or wait.’
2. Then restructure:
- Identify key support/resistance and breakout points on daily charts to plan trading areas.
3. Later levels:
- Use candlestick signals and volume on the hourly chart to find entry opportunities, rather than pursuing absolute prices.
The essence of trading is a probability game.
The trend provides a high probability direction, structure provides high risk-reward opportunities, and levels are just execution details. Violating this order is akin to covering strategic laziness with tactical diligence—this is often the root of losses for most traders. **True experts do not rely on catching every fluctuation, but understand how to find the most effortless pivot within the torrent of trends.
