Analyzing Market Trends using a Visual Approach

Abstract

This research discusses various technical analysis methods and their flaws in the stock market price trend, and proposes a plan that integrates several technical indicators to analyze the price trend. Changes in price trends are mainly due to market uncertainty about the future. The macro investment sentiment is crucial to the impact of price trends. Any political and financial decision-making changes or events can affect the market's investment sentiment. Changes in securities market prices usually have a direct response to changes in the macro investment environment. A single technical indicator captures this change. But when multiple technical indicators are used, there is the potential for conflicting signals. Investors can judge future trends based on their familiarity with the market or experience. For resolving the conflict of technical indicator signals and managing future uncertainty, this study uses information entropy theory as an algorithm for integrating technical indicators and then forms an easy-to-read price trend chart. The K-line chart with various color changes provides a visual price trend judgment to facilitate investors to make decisions. This study uses several exponential moving averages as the main component indicators of price information entropy to test the Dow Jones futures and many individual stock research objects. The emphasis of this study is not on finding indicators that are 100% profitable, but on the management of market uncertainty. The liquidity of investment products is very important, and sufficient liquidity is needed to accurately judge the trend. When the price trend is uncertain, the K-line chart designed in this study is displayed in different colors, and investors can directly observe whether they can enter the market for trading. The timing of entry and exit proposed in this study is entirely based on the certainty of the trend. In the verification, strictly observe the timing of entering and exiting the investment strategy, and only enter the market when you are sure of the trend, so that the investment profit is significant. This study verifies the practicability of this method with past historical data.