Recently, many people have been asking how to use the Bias indicator to find buy and sell points, so I will organize the core logic of this indicator to hopefully help everyone.

Simply put, the Bias is an indicator used to measure how much the stock price deviates from its moving average line. Its English name is BIAS. You can think of it as a warning tool; when the stock price rises too wildly or falls too sharply, it will alert you that a rebound or correction might be coming.

Let me explain with a simple example. Imagine a bumper harvest year, where a large amount of rice hits the market, and prices soar to a new high. Farmers worry that there will be no buyers later, so they start competing to lower prices to sell. The same logic applies in the stock market: when stock prices rise too much, investors start worrying about a decline and sell early; conversely, when prices fall too much, everyone thinks it's cheap and begins to buy the dip. The Bias aims to capture such excessive fluctuations.

The calculation is quite straightforward. The formula is: N-day Bias = (Closing Price on the Day - N-day Moving Average) / N-day Moving Average × 100. The core idea is to see how big the gap is between the closing price and the moving average. If the price is above the moving average, it’s a positive Bias; below it, a negative Bias. The larger the positive Bias, the more profit has been made, and the greater the selling pressure; the larger the negative Bias, the bigger the decline, and the more potential for a rebound.

How to use it to find buy and sell points? Generally, in a weak market, a Bias above 5 is considered overbought, and you might consider reducing positions; a Bias below -5 is oversold, and you might consider buying the dip. In a strong market, the standards are stricter: Bias above 10 is overbought, and below -10 is oversold.

Different periods will show different Bias behaviors. Common ones include 5-day, 10-day, 30-day, 60-day, as well as 6-day, 12-day, 24-day, 72-day cycles. You can choose based on your trading style.

But beware of a pitfall: Bias is a lagging indicator, meaning its response is a bit delayed. If a stock is gradually rising or falling over a long period, Bias may not be very useful. Also, its effectiveness varies between large-cap and small-cap stocks—large caps tend to be more stable, making Bias judgments more accurate; small caps are more easily manipulated, and relying solely on Bias can lead to traps.

Therefore, my advice is: don’t rely solely on Bias. It’s best to combine it with other indicators like KD or Bollinger Bands, which can greatly improve judgment accuracy. Parameter selection is also crucial—too short a period may lead to overtrading, while too long may cause you to miss opportunities. Adjust according to your trading style.

Another point: when selecting stocks, consider the company’s fundamentals. Stocks with good performance and low risk tend to rebound quickly when falling because everyone rushes to buy the bottom; stocks with poor performance, even if they fall deeply, may rebound slowly. So, Bias should be used flexibly and not applied rigidly. Overall, Bias is a useful reference indicator, but not a magic solution. Combining it with other tools and fundamental analysis is the right approach.