The 5 Most Common Mistakes People Make in Chan Theory Trading Practice

I. Treat “drawing charts” as “analysis”

Many beginners spend a lot of time纠结 over how to draw lines and how to split segments, but forget that the core of Chan Theory (缠论) is price action structure.

Drawing charts is just a tool, not the goal.

The right approach:

• First, look at the big picture: what kind of trend structure is this?
• Then, determine the level: which level’s central consolidation is it?
• Finally, refine details: how are pens (笔) and segments divided?

Remember: the central consolidation determines the direction; pen strokes are only the details.

II. Level confusion and random switching

You see a buy point on the 1-minute chart and enter—then you get stuck in a losing position. After that, you switch to the daily chart to comfort yourself by saying, “The big trend is still there.”

This is typical level confusion.

Chan Theory emphasizes “level recursion”: lower levels must be subordinate to higher levels. In practice, you should do this:

• First, set the trading operation level (e.g., 30 minutes)
• Then use a secondary level (e.g., 5 minutes) to find a more precise entry
• After confirming the buy point, return to the operation level to hold the position

Frequent switching of levels only makes you more and more confused.

III. Mechanizing divergence judgment

Seeing MACD divergence and concluding that a reversal is guaranteed is the biggest misunderstanding of divergence.

Divergence is fundamentally energy exhaustion, not an indicator signal.

Common mistakes:

• Look only at MACD golden/death crosses and ignore the price action structure
• Ignore the location of the central consolidation and judge divergence in isolation
• Forget the prerequisite conditions of the “divergence reversal theorem”

A correct understanding:

• Divergence must be judged within a complete trend structure
• You need to compare the strength of the two legs of price action
• After confirming divergence, you still must wait for secondary-level confirmation

Divergence is confirmation, not prediction.

IV. Worshipping the myth of “the first-class buy”

Many people treat the “first-class buy point” as the holy grail, believing that catching the first buy will maximize profits.

The reality is:

• The difficulty of judging the first buy is the highest
• You need to precisely capture the trend exhaustion point
• There are many false signals, leading to frequent stop-losses

A more pragmatic path:

• First, master the second buy: risk is more controllable
• Then understand the third buy: higher efficiency
• Only finally study the first buy: this is a higher-level skill

Beginners chasing the first buy often end up paying the most tuition (learning costs).

V. Value technology, neglect execution

After learning Chan Theory, the technical framework may be clear, but you still lose money.

The reason is simple: knowing and doing don’t match.

Typical signs:

• See a buy point but don’t dare to buy, worried “this time is different”
• Buy it but can’t hold—panic at the first period of consolidation
• Even when you know you’re wrong, you don’t cut the loss; you keep hoping “it will come back”

Chan Theory mainly solves “how to look.” Mindset management solves “how to act.”

Even if the technology is great, if execution is not there, you’re still at zero.

Trading ability = technical cognition × execution ability

Summary

| Mistake | Root cause | Correct understanding | | ------------ | -------------- | ------------------ | | Treating drawing charts as analysis | Confusing tool and purpose | Structure first; pens as auxiliary | | Level confusion | Lack of recursion awareness | Determine the level; stick to the level | | Mechanizing divergence | Indicator dependence | Energy exhaustion is the essence | | Worshipping the first buy | Chasing perfection | Second buy and third buy are more practical | | Emphasizing tech, neglecting execution | Separation of knowing and doing | Balance technology and mindset |

Avoid these 5 traps, and the path of Chan Theory will be much smoother.

Chan has no measurement · Use Chan to verify Chan