Recently studying technical analysis, I increasingly find the Chán Theory system genuinely interesting. To put it simply, it encodes market trends using a set of strict rules, making your view of the market as clear as reading your own palm.

Many people trading cryptocurrencies are driven by greed and fear, chasing high out of FOMO one moment, then panicking and cutting losses the next. The core of Chán Theory is actually replacing emotions with rules. It transforms unordered price fluctuations into an orderly structure through concepts like fractals, strokes, and central points, allowing you to precisely identify buy and sell points.

It sounds simple when explained, but truly understanding Chán Theory requires grasping a few key points. First is the issue of levels. Higher levels (daily, weekly) determine the trend direction, while lower levels (5-minute, 30-minute) determine the rhythm. Many people lose money because they ignore levels, frequently trading on lower levels and getting slapped by the trend on higher levels. The correct approach is to use the larger level's upward trend to reduce costs with small-level fluctuations; when the larger level is downward, just hold cash and wait patiently.

Next is the type of trend. Chán Theory divides trends into trending and consolidating. Consolidation means oscillating within a central zone repeatedly, while a trend contains at least two or more central points. The definition of a central point is clear: the overlapping part of three consecutive secondary-level trend types. Once you understand the central point, you can see whether the trend is extending, expanding, or renewing.

Then there's divergence. This is a key signal for judging when a trend ends. Divergence at high levels is a sell signal, divergence at low levels is a buy signal. Using MACD to assist in judging divergence works well, but it must be combined with the performance of the yellow and white lines; don’t just look at the red and green bars. If the price or coin hits a new high but the MACD's red bars are shrinking, that’s a typical top divergence, and you should consider reducing your position.

Fractal operation is the most directly applicable in practice. Three candlesticks form a fractal: the middle candlestick is the highest point at the top, or the lowest point at the bottom. There are two types of fractals: intermediate and standard. After an intermediate fractal, the trend continues in the original direction; after a standard fractal, a new stroke will form. The method to judge is whether, after the second type buy or sell point on a lower level, a consolidation divergence appears, and whether the price effectively breaks below the 5-day moving average.

Moving averages are also very important. Use the crossover of the 5-day and 10-day moving averages to judge trend and divergence. When the 5-day is above, it’s bullish; when the 10-day is above, it’s bearish. After bulls and bears intertwine, you need to determine whether it’s a continuation or a reversal, which guides your trading direction. Concepts like “kiss,” “lip kiss,” and “wet kiss” sound interesting, but essentially they refer to the strength of short-term moving averages breaking through long-term ones.

In actual trading, Chán Theory provides a complete procedure. For example, if you decide to buy on the 30-minute chart, you should look for the first buy point on the 5-minute chart to enter, confirming divergence on the secondary level. If you miss the first buy point, there’s still a second opportunity. But be cautious—taking a third buy point carries high risk and is generally not worth it in weak markets.

Combining multiple levels for judgment is also very practical. Use the state of daily and weekly charts to assess trading risk. When both are in an uptrend, risk is minimal; when both are in a downtrend, risk is highest. This helps you quickly determine whether to actively participate or stay on the sidelines.

Ultimately, Chán Theory is about turning market chaos into a quantifiable system. It tells you when to buy, when to sell, and when to hold. Cost control is crucial—by constantly using small-level buy and sell points to lower costs, you can achieve long-term invincibility.

Finally, I want to say that Chán Theory is not a prediction tool but a description tool. It describes what the trend has already done, not what will happen. That is its core value. If you can truly understand and master Chán Theory, operating on platforms like Gate across various assets, you can build your own trading system, ensuring emotions no longer dominate your decisions.