The Philosophy of Growth Trends: Observing the Evolution of Trends Through Small-Scale Recursion

Today’s Topic: Recursion — the Core Algorithm of Chan Theory

Many Chan practitioners get obsessed with drawing brushes and lines, but they overlook the most core way of thinking in Chan Theory: recursion.

So-called recursion means starting from the smallest-level K-lines and growing larger trend structures layer by layer. Just like a seed grows into a big tree— the seed is a 1-minute seed, the minutes are the branches of 5-minute branches, and the monthly line is the branch of the yearly line— every level grows out of the level below it; it isn’t defined out of thin air.

Two Preconditions of Recursion

Precondition 1: Levels cannot be exceeded. The 5-minute central zone is constructed from 1-minute trend types, not assembled by directly stitching together 5-minute K-lines. Many people use the “highs and lows on the 5-minute chart” to draw 5-minute strokes—this already violates the recursion principle.

Precondition 2: Trends must end in perfection. Any trend at any level, of any trend type, must eventually end. Once you understand this, you won’t blindly try to guess tops and bottoms in a trend— the signal that a trend has ended comes from the appearance of the opposite trend type at the same level.

The essence of recursion is: growth, not setting.

Chan Theory Practical Tactics: How to Use Recursion to Judge the Life and Death of Trends

Method: Three-stage confirmation + divergence verification

1. Find the most recent central zone at this same level.
2. Observe whether the exit segment and the entry segment form a divergence.
   Divergence judgment criteria: slope, volume/energy, and the MACD histogram red/green bar areas—the best result is when all three resonate together.
3. Wait for a lower-level pullback that does not break the central zone boundary.
   If the pullback drops back into the central zone, the original trend has not been confirmed dead; if the pullback stops above the boundary, a third-type buy/sell point at this level will most likely follow.

Key reminder: Don’t frequently upgrade during an ongoing trend. If your operating level is 5 minutes, then only focus on 5-minute signals. Don’t rush to act just because you see divergence on 1 minute—that’s a different-level game.

Market News

① Federal Reserve Beige Book: Most regions see moderate economic growth, with easing inflation pressure The latest Beige Book from the Federal Reserve shows that, as of the end of May, economic activity in most parts of the U.S. remained moderately expanded, the labor market was generally stable, and the price level edged down. Compared with the previous report, the overall tone is more moderate, and market expectations for rate cuts have warmed slightly.

② China May CPI up 0.3% YoY; PPI decline narrows Data released by the National Bureau of Statistics shows that in May, the national consumer price index rose 0.3% year over year. Industrial producer prices fell 1.4% year over year, with the decline narrowing by 0.6 percentage points from the previous month. Overall, the data meets expectations; the narrowing PPI decline indicates that price pressure on the industrial side has improved somewhat.

Reflections on Cultivating the Mind

Recursion in trends tells us: everything is grown out.

You can’t rush it. A 1-minute trend won’t turn into a 5-minute trend because of your anxiety—it must complete its own structure. Likewise, your trading system and mindset cultivation are not built in a day.

Levels are not only about time frames; they also represent a kind of patience. Wait at the right level, act at the right level—don’t cross boundaries, and don’t behave beyond what’s appropriate.

The Zen master said: Trends unfold in the present moment. It means—accept the facts of the moment, not the facts you expect. If divergence appears, acknowledge it; if the trend extends, then wait—that is a Zen practitioner’s steadiness.