Basic Knowledge

Contract K-Line Practical Quick Reference Checklist

I. Four Basic Elements of K-Line

- Opening Price: The first transaction price at the start of the period
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- Closing Price: The last transaction price at the end of the period
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- Highest Price: The highest transaction price within the period
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- Lowest Price: The lowest transaction price within the period
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- Bullish Candle: Close > Open, buyers dominate; Bearish Candle: Close < Open, sellers dominate
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- The longer the real body, the stronger the trend momentum; the longer the shadow, the more intense the battle between bulls and bears

II. Core Cycle Combinations (Essential for Practice)

- 5 Minutes: Short-term high frequency, quick signals, more noise, suitable for quick in and out
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- 1 Hour / 4 Hours: Main trend cycles, filter out clutter, higher win rate
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- Daily: Set the main direction, small cycles must follow the big cycle, trading against the trend is extremely risky

III. High-Probability Reversal Patterns (3 Core Types)

1. Hammer: At the end of a decline, lower shadow ≥ 2 times the body, very short upper shadow, indicates a bottom signal
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2. Engulfing Pattern: The second candle's body completely engulfs the previous one, strong trend reversal
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3. Morning/Evening Star: Three-K Candle pattern, corresponding to bottom/top reversal, highly reliable

IV. Practical Meaning of Shadows

- Long Upper Shadow: Price rises then falls, strong selling pressure above, beware of a top
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- Long Lower Shadow: Price tests the bottom then rebounds, strong support below, watch for stabilization
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- The longer the shadow, the greater the disagreement between bulls and bears at that level, often key support/resistance levels

V. Contract Risk Control Iron Law

- Only trade in the direction of the larger cycle; trading against the larger cycle on a smaller cycle = high risk
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- Key K-Lines (breakouts/reversals) must have stop-losses; shadows at the end are often false breakouts
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- After consecutive long bodies, a long shadow appears, likely trend exhaustion, prepare to reduce positions
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- Do not over-leverage or hold large positions; K-line signals combined with position management are effective