Formation and Transformation of Trends

1. Prerequisite of Structure: The rhythm of 'higher highs and higher lows' is fundamental, and it itself is the embryonic form of a trend. Only within this orderly rhythm does a previous high hold the significance of a 'resistance level', making the breakout valuable for reference.

2. Logic of Confirmation: Do not chase the first breakout; wait for a pullback to hold above the previous high. Essentially, this assesses 'whether there is capital willing to support at a higher level after the breakout'. If the pullback breaks the previous high, it indicates that the breakout may be a short-term impulse from capital, and consensus has not formed.

3. Setting Stop Losses: Use the 'structural starting point' as a boundary, allowing the trend to have fluctuation space while also being able to exit promptly when the trend is invalidated, reflecting the principle of 'letting profits run and cutting losses'. Adjusting the stop loss based on previous lows is a classic method of dynamically locking in profits and following the trend.

4. Deeper Meaning: 'Change of Positions and Market Consensus' points out the essence - structural breakouts are not just price actions, but signals indicating that the bulls have gained dominance after a tug-of-war between bulls and bears. Once this consensus is formed, the sustainability of the trend will be stronger.