Recently, someone asked me about Chan Theory again, so I might as well organize my understanding of these years. To be honest, Chan Theory restores the most authentic face of the capital market, exposing all human greed and fear.

The brilliance of Chan Theory lies in that it is not a mere guesswork, but based on a deep understanding of human nature, using a rigorous set of rules to deconstruct market trends. Simply put, it turns disorderly markets into orderly ones, allowing you to see the trend as clearly as reading your palm.

The core ideas are actually three things: the central point, trend types, and levels. I found that many people get stuck on the concept of levels when learning Chan Theory. In fact, levels are like geometric axioms, everywhere. Your operational level determines your time frame for analyzing the market; a capital of 1 million and 10k are not just different in scale, but more importantly, involve completely different cycles. Small capital might freely enter and exit on the 1-minute level, while large capital must wait for the daily bottom pattern to form and the trend to clarify before acting.

Speaking of buy and sell points, the most exciting part of Chan Theory is the concept of "perfect trend completion." An uptrend must end, and a downtrend must end. The moment a downtrend type finishes is the best entry point, called the first buy point. But to judge this end point, the key is to look for divergence. If divergence does not appear, the trend is not yet complete. I use MACD to assist judgment, but I don’t rely solely on the green and red bars; I also look at the yellow and white lines, especially the yellow line.

The pattern is the fundamental unit of operation in Chan Theory. Bottom patterns and top patterns can be formed by just three consecutive candles. But don’t underestimate this; patterns tell you whether a new wave is forming or if the trend is continuing or reversing. I usually use higher-level patterns to frame lower-level operations, such as using 30-minute patterns to assist in judging the end of 5-minute segments.

In actual trading, I most often use a dual structure of daily and 30-minute charts. First, check the state of the daily chart, then use the 30-minute chart to precisely identify buy and sell points. If both the daily and weekly charts are in an uptrend, then hold with confidence, using small fluctuations to reduce costs. Conversely, the same applies in a downtrend.

To put it simply, Chan Theory builds trading on a solid real foundation, not on guesses driven by greed and fear. Once you truly understand this system, you can gradually eliminate emotional interference. That’s why I always emphasize mastering the rules of Chan Theory thoroughly, because the rules are signals of opportunity and risk.