[Red Envelope] Practical Post Fourteen, Trend Trading System (Enhanced Version): The Winning Secret in Trending Markets

Like and support, continuous gains; Keep asking questions, long-term benefits! Hello everyone, I am Wan Gu Zhang Qing. [Taogu Ba]
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1. Preface
I believe everyone has deeply realized the changes in the market environment after experiencing this month’s trading. Short-term trading has not seen any main theme stocks for the entire month. Although some hot topics have been interspersed, the profit effect has been far behind the loss effect. Many lagging stocks have directly hit the limit down, and the tiered boards are filled with various industry chain stocks—Mingdiao, Meibang, Hongxing—these are all stocks made along industry chains. Once these stocks are abandoned by the industry chain, the loss effect is astonishingly severe. Recently, friends doing short-term trading should have felt this deeply—either feeling at a loss on where to start or facing large declines, which is very painful. Although recently Yunnan Energy Development has continuously exceeded expectations, breaking the long-standing five-board limit, this phenomenon has indeed excited many short-term traders. However, looking at the entire tiered board gradient, only Yunnan Energy Development is strong in short-term continuous boards; the whole tiered team remains incomplete and mostly junk stocks, which certainly means little profit effect.
Although overall short-term continuous boards have not been profitable recently, the trend direction is blazing. Most profit effects in the market are aligned with this trend. From recent bidding, we can see that although the past two days’ bidding opened with many short-term traders in tears, the trend direction is unaffected and still thriving, indicating a change in market style. If you are in a flat trend recently, you should be doing very comfortably. Recently, many stocks have hit new highs with continuous boards, many of which have been captured by my constructed trend main-up formula, and they also show buy points consistent with trend trading systems. Strict execution can yield good returns, with ample operation time and fully controllable drawdowns. There’s no need to compete daily to see who runs faster like in short-term trading—miss a move and you’re on the floor. I believe trend stocks’ operation style is more suitable for most friends.
Although the previous trend trading system is already quite complete, mature, and has significant profit effects, through this period and your feedback, I have gained deeper insights into trend stocks. Therefore, today I am writing this valuable post to update and improve the original trend trading system and to revolutionize some of your trading concepts, aiming to bring more profit effects to everyone.
2. Concept Update
Have you ever thought about these questions: What is the essence of stocks? Why are they worth our money? How can we profit from them? These three questions are very important, but I fear many people haven’t thought carefully about them. Let me share my personal understanding and answers.
First, for most retail investors, the essence of stocks is just chips on a gambling table—props in a casino game. If they cannot be exchanged for money, they have no real meaning. Some might object, saying stocks are ownership certificates issued by joint-stock companies, representing the holder’s claim to part of the company’s assets and earnings. Buying stocks is like becoming a shareholder. But in reality, these official statements are meaningless to most people. They rarely get to experience these rights in practice—few have the qualification to attend shareholders’ meetings, let alone enjoy the rights to assets and earnings. When a company defaults or goes bankrupt, the losses of small and medium shareholders are often ranked very low in the payout order, and they usually get little to nothing back.
So, for most people, the essence of stocks is just chips on a gambling table. As for why they are worth buying, it’s simple: if you want to gamble, you need chips—this is one of the most important values of stocks.
Finally, how do we profit from stocks? Most people profit by buying low and selling high to capture the difference. As for dividends, unless you are a long-term investor, the gains are negligible.
After clarifying these three questions, I can point out a common misconception in many traders’ minds: the tendency to hype stocks based on their logic. I often see people saying, “This stock’s logic is so good, it will definitely rise in the future,” and then they hold heavily before the stock actually starts to move, waiting for the breakout. Sometimes the entire sector has already run, and their stock hasn’t yet, but because they believe in its logic, they hold on stubbornly, wasting time and capital.
Of course, stocks with logical backing tend to rise more easily, but that doesn’t guarantee they will rise. In the A-share market, many funds pursuing short-term gains chase the momentum rather than the logic. The stocks with high rankings or strong momentum tend to be the leaders. Has anyone ever heard of “logic determines the leader”? Many buy stocks based on recognition or visibility, not on deep logical analysis. Most people lack the ability to analyze logic thoroughly. And any stock can be explained with some logic if you try hard enough—just find a point to hype.
Therefore, I believe that in the current market, it’s inappropriate to rely on digging for logic or ambush strategies for trading. Stock selection should prioritize capital recognition. As long as there is capital backing, it’s a good stock; if not, no matter how good the logic, it’s just junk. This applies not only to short-term trading but also to trend trading. For example, during the commercial aerospace wave, the leader was Aerospace Development. Is its logic very solid? Probably many aerospace stocks have stronger logic than it. But it was the first to start, with the highest recognition, becoming an unavoidable target in the aerospace sector.
Similarly, Silver in non-ferrous metals—many still think its main business is silver, but it’s just located in Baiyin, and its main products are copper, not silver. Silver is just a place name, not the main business. Its core product is copper. Yet many treat it as a silver leader, even though copper prices also rose significantly, they couldn’t support the huge gains of Silver in non-ferrous metals.
From the current market situation, although this is somewhat abstract, it indeed exists and is the mainstream view. Those who dig deep into logic are often out of sync with the crowd. My purpose in writing this is to clarify some of your concepts. Currently, capital is king, logic is secondary. Don’t confuse the order, or you’ll keep drawing wrong conclusions. The market is always right, no matter how abstract it seems. This concept applies to both short-term and trend trading. Unless you plan to trade trends on a yearly basis, in which case the underlying logic is more important.
Logically sound stocks are more likely to rise, but turning that logic into actual gains often takes years or even decades. Short-term surges are usually driven by short-term funds and are not sustainable. So, when you hype stocks based on logic, ask yourself: what was your original intention? Are you genuinely optimistic about its logic and planning to hold long-term? Or are you just tempted by short-term surges? If you get caught, don’t pretend you’re a long-term believer.
In trading, more important than losses is time and the willingness to accept risk. If you buy for short-term gains, don’t talk about logic—because the realization of logic takes time. Everything depends on capital recognition.
3. Updating and Improving the Trend Trading System

1. Environment Judgment and Position Management
   After the concept update, I believe you will have a deeper understanding of my latest trend trading system updates. All choices are based on capital recognition.
   In the twelfth post of the latest trend trading system, I incorporated environment judgment and position management from short-term trading into the trend system. But now I realize that’s not reasonable because environment judgment and position management differ between short-term and trend trading.
   Short-term environment mainly involves rotation and main rise, judged by sector performance. Trend main rise is different; it’s anchored to index performance. When the index oscillates, it corresponds to trend rotation; when the index rises strongly, it indicates a trend main rise.
   Position management also differs. Short-term position management is based on environment and the proportion of limit-up/limit-down bids. But through recent trading, I found that trend stocks’ movements are not related to bidding activity. Even poor bidding doesn’t affect trend performance. So, environment judgment and position management for trend stocks should be different from short-term.
   To summarize: trend rotation and main rise are anchored to index performance. When the index oscillates, it’s trend rotation; when it rises, it’s trend main rise. The upper limit for position size in the former is five layers; in the latter, nine layers. Trend trading is suitable for flat, especially in rotation markets. Please note this difference.
2. Finding Guidance
   Previously, I divided trend stocks’ guidance into two types: macro long-term favorable guidance and short-term bidding cues. Now, after the concept update, long-term macro guidance is unnecessary because any stock in my trend main-up formula is already recognized and initiated by capital, with inherent macro and logical support. No need to seek it ourselves. Institutions investing billions in trend stocks will naturally explore such logic, supported by their research teams and on-site investigations. Their choices reflect capital flow. Just follow the capital flow; no need to dig into long-term guidance or logic.
   Short-term bidding cues still have some reference value. Although poor bidding doesn’t affect trend stocks’ performance, strong bidding signals can influence related trend stocks, especially in the short term. Institutions don’t rely on bidding for stock selection, but short-term funds do. When bidding cues appear, they often correspond to explosive days for trend stocks, making them more likely to hit the limit-up.
3. Stock Selection
   This mainly relies on my constructed trend main-up formula. Sometimes you look for stocks outside the formula, but I don’t recommend this because each indicator in the formula has logical support. Stocks not meeting the criteria often have flaws and are not recommended.
   The formula is: Top 50 by trading volume, main board of Shanghai and Shenzhen, within 10 trading days have hit the limit-up, within 10 days no limit-down, 5-day moving average trending upward, free float market cap over 20 billion, turnover rate below 30%.
   (1) Top 50 by trading volume indicates large liquidity and big capital involvement.
   (2) Main board of Shanghai and Shenzhen, the formula is more suitable for main board stocks. Other stocks with different涨幅 are not recommended.
   (3) Within 10 trading days, have hit the limit-up, indicating the stock has started and the stock’s nature is activated, making a good rise possible later.
   (4) No limit-down in the last 10 days, trend stocks should not have such extreme situations recently.
   (5) 5-day moving average trending upward, ensuring the stock is strong enough.
   (6) Free float market cap over 20 billion, trend stocks require a certain capacity.
   (7) Turnover rate below 30%, trend stocks shouldn’t have too high turnover; over 30% often indicates short-term emotional stocks.

After filtering stocks with the trend main-up formula, further screening is needed. First, exclude stocks with previous highs, especially within half a year, as they tend to have more trapped positions, hindering subsequent rises. Prioritize stocks hitting new highs without any trapped positions for smoother upward movement.
4. Buy and Sell Points for Trend Stocks
In the previous trend trading system, I identified three daily buy points for trend stocks: the first day of the first limit-up is day N; after that, the next day (N+1) cannot be bought because it’s a relay. Trend stocks are not suitable for relay trading. If the first day after the limit-up (N+1) is a break, then check if the second day (N+2) the stock can be supported at high levels. If supported, it indicates ongoing capital support and potential for further rise. This is the first buy point.
The saying “long duration must fall, no rise then fall” applies. On the third day after the limit-up (N+3), a directional choice should be made. If the trend points upward, it could be the start of a second wave, and adding positions is possible—this is the second buy point and a successful trade.
The third buy point is the common five-day moving average buy point: after the stock hits the limit-up and then rebounds near the five-day moving average, it’s also a buy point.
These daily buy points are quite mature and don’t need updates. Especially the five-day moving average buy point—many trend stocks bounce at the five-day line and then make good gains.
For intraday buy points, I usually consider three:

• First, strong support near the moving average, which is the average cost of intraday holdings. Large funds tend to support at this level, and prices tend to rebound here, making it a buy point.
• Second, strong support near the zero line (zero axis), considered the “life line” of stocks. Above zero is strong, below is weak. Funds often support at this level, even during green drops, quickly bouncing back.
• Third, confirmation of strong support at the end of the day. Since the first two are theoretical support levels, funds usually support here, but it’s not guaranteed. So, the third buy point is confirmed strong support at the close. If the stock closes above the moving average or zero line, it’s a clear sign of support, forming a buy point. If it drops sharply at the close, it’s better to abandon.
  Note: Many trend stocks may surge then fall back, and although they close green, I recommend avoiding such stocks on the same day. If a stock surges then falls back, forming a previous high, and the next day opens lower, it’s better to wait for the stock to continue staying red or break the previous day’s high before entering. These tend to be stronger stocks with higher potential.
  Recently, some stocks meet the trend buy points early in the day with violent rises. This makes it tricky—buying at the open risks a pullback, but not buying means missing the move. My solution is: wait until the trading volume reaches half of yesterday’s, observe if the stock retraces with strong support (not breaking the moving average). If support is strong, you can buy near the moving average.
  Another case is when the stock is very strong and might hit the board directly. In this case, wait until the volume reaches half of yesterday’s again. If the volume is above 8 points, consider buying on the board. Don’t buy blindly early; look for signals like matching bidding cues. If no cues, check if the sector has significant gains. Meet one of these conditions, then consider board trading, preferably on stocks hitting new highs with no trapped positions.
  Now, about selling points: I prefer short-term trading, so I don’t hold stocks long. I look for strong stocks and decisive action. If a stock breaks the limit-up and the next day (N+2) I buy, and on the third day (N+3) it doesn’t go up, I sell—half if sideways, full if down.
  Another common sell point is when the stock breaks the five-day moving average. If it breaks, I consider it not strong enough and sell.
  These sell points are detailed and haven’t changed much. They depend on personal style. For example, I buy on N+2 and sell if no upward move by N+3, with no patience for waiting. Many stocks only rise later, which I don’t like to wait for. I prefer stocks that show strength at the open.
  Also, stocks that hit the limit-up for consecutive days are handled by recording the previous day’s limit-up as day N, then following the trend system.
  This completes the update of the trend trading system, which now can handle most market situations. These solutions are based on real trading problems you might encounter. Think about them calmly; many people are obsessed with account gains and losses, unable to relax and observe the market. As I wrote in my “Path to Truth,” a calm and loving heart is the source of everything. I hope everyone can trade with less obsession over profits and losses, and more calmness, to naturally discover hidden market rules.
  If you’re interested in my trading system or have questions, check out the following five highly valuable and detailed posts. Most of your questions can be answered there. I strongly recommend you read them.

Dry Goods Post 8, Market Opening System and Trading Issues

https://www.tgb.cn/a/2oKcAK2QOMi

[Red Packet] Dry Goods Post 10, Software Trading System, Little Known

https://www.tgb.cn/a/2p1TNOTUWWS

[Red Packet] Dry Goods Post 11, Market Opening Trading System (Updated)

https://www.tgb.cn/a/2pdneR1ZAWK

[Red Packet] Dry Goods Post 12, Trend Trading System (Updated Version)

https://www.tgb.cn/a/2pp4mJkBWCQ

[Red Packet] Dry Goods Post 13, Path to Truth

https://www.tgb.cn/a/2pAw5lNyIZN

4. Daily Reflection
I will keep saying this—to let everyone who reads this understand my sincerity!
Regarding these trading systems, I have some words to share: these systems are my heartfelt gift to everyone. They are not perfect treasures, nor are they flawless, but they are still worth cherishing. What are they, and why cherish them? I see them as a platform—like Taogu Ba, a bridge for communication. Through these systems, those who trust me can test them in real trading. In the process, they will encounter many problems, which they can feedback to me. I will then think of ways to solve these issues. This communication and exchange can bring us closer. These systems can also be continuously improved. They may not be at a very high level now, but I believe that with everyone’s joint effort, they will eventually help us ride the waves in the stock market.
There is a saying in the market: retail investors are the main force, but because of lack of unity, they can’t break out. My ideal is to unite everyone through these systems. As long as we can reach a consensus and everyone recognizes these systems, we can become a powerful force in this market. This consensus does not rely on premium seats or hype, but on the trading system we build together. I believe this is the best way to forge consensus. On the day of success, we will be the most beautiful scenery in the market. I created these systems, but ultimately, they will be perfected by you. I sincerely ask everyone: if you agree with these systems, please actively participate. I believe the future market will have a place for us.
In the Ming Dynasty, Hu Zongxian wrote a poem for Hai Rui and himself to clarify his mind. Inspired by his wisdom, I also found a poem for myself to clarify my heart.

“Gift to Fellow Stock Enthusiasts—System’s Heartfelt Oath”

I dedicate my sincere heart to forge the sword’s edge,
Opening sources and gifting friends, hoping to meet again.
Not seeking perfection to amaze the world, but building bridges to cross the wild geese.
Practical testing reveals true knowledge, feedback refines the jade and the mirror.
Gathering strength from scattered sands, a shared vision shines bright.
No envy of fame or hollow praise, only unity to build a strong city.
Today we walk the thorny road together, tomorrow we look upon clear skies afar.
5. Acknowledgment List
Thanks to the following friends for your encouragement. Your support is my greatest motivation for updates.
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Gold Fans, remember this moment—thank you for your strong support @BeginnerCrossing@Me1Otter
Finally, as always, my closing words: if you find this helpful, please give a free like and follow. If possible, support more. I will continue to share more valuable content and improve everyone’s trading systems. Your support is my biggest motivation. Wishing everyone a long and prosperous journey!