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First, the basic concepts, principles, and theorems are listed as follows:

Trend: The pattern seen when opening a price chart. Trends are categorized into different levels.

Trend Types: Uptrend, Downtrend, Consolidation.

Trend: Upward, Downward.

Zhongshu in Chan Zhong Shuo Chan Trend Central: The part of a trend type at a certain level that is overlapped by at least three consecutive sub-level trend types. The specific calculation is based on the overlap of the previous three consecutive sub-level trend types, which can be expressed with strict formulas: For three consecutive sub-level trend types A, B, C, with respective high and low points a1\a2, b1\b2, c1\c2, the central zone is (max(a2, b2, c2), min(a1, b1, c1)). In practice, visual estimation suffices, and such complexity is unnecessary. Note that the three completed trend types at the sub-level (consolidation and trend) are necessary to form the trend central in Chan Zhong Shuo Chan. These completed trend types are clearly visible on the sub-level charts, so there is no need to look further down to lower levels.

Chan Zhong Shuo Chan Consolidation: In any level of trend, if a completed trend type contains only one Chan Zhong Shuo Chan trend central, it is called a consolidation at that level.

Chan Zhong Shuo Chan Trend: In any level of trend, if a completed trend type contains at least two or more consecutive same-direction Chan Zhong Shuo Chan trend centrals, it is called a trend at that level. The direction is upward for an uptrend, downward for a downtrend. Note that the Chan Zhong Shuo Chan trend centrals within a trend must not overlap.

“Basic Principles of Chan Zhong Shuo Chan Technical Analysis I”: Any trend type at any level must eventually be completed.

“Basic Principles of Chan Zhong Shuo Chan Technical Analysis II”: Any completed trend type at any level must contain at least one Chan Zhong Shuo Chan trend central.

“Trend Decomposition Theorem I”: Any trend at any level can be decomposed into a connection of three trend types at the same level: consolidation, decline, and rise.

“Trend Decomposition Theorem II”: Any trend type at any level is composed of at least three segments of sub-level trend types.

Principle 1: “Any trend type at any level must eventually be completed.” This simple statement contains the most fundamental aspect of technical analysis—the philosophy and soul of it. Without this, it would be impossible to list it as Principle One. The most basic question is: how to determine that a trend type is complete? This is one of the core issues in technical analysis. For example, once you determine that a “decline” has ended, you know that the next phase must be “consolidation” or “rise.” Both of these trend types will generate profits for the bulls; the only difference is in size and speed. If a 100% certain profitable pattern could be found in the market, that would be the greatest achievement. As for size and speed, new standards can be developed for judgment, but that is a matter for later discussion.

The biggest and only difficulty here is the “extension of trend types.” For example, after a consolidation, three overlapping consecutive sub-level trend types can signal that the consolidation may end at any time. In other words, once three overlapping sub-level trend types appear, the consolidation can end perfectly, but it can also continue indefinitely, oscillating around the Chan Zhong Shuo Chan central zone endlessly. This is similar to a young man who, upon reaching certain standards, immediately qualifies to become a consort, always ready to be taken, yet he can also persist indefinitely, self-isolate, refuse consumption, and ultimately waste himself, ending up as a rotten apple.

Similarly, for trends, after forming two consecutive same-direction Chan Zhong Shuo Chan trend centrals, the trend can end at any time but can also continue to extend, forming more centrals. This situation is very common in practice. If the trend is upward, it will keep rising—look at charts like 600519. When considering adjustments, you can see a continuously extending rise. The same applies to the 30-minute chart after the market bottomed in 2005. Many traders fail to catch the bull stocks because they do not clearly understand this. Conversely, the extension of a downtrend is a nightmare for bottom-fishers. Why is it difficult to top out or bottom in? Ultimately, it’s because of this “trend extension.”

How to determine whether the “trend extension” has ended? First, you must understand what “trend extension” actually is. For trends, it means the continuous generation of same-level Chan Zhong Shuo Chan centrals in the same direction. For consolidations, it means no new Chan Zhong Shuo Chan centrals are formed. Since “trend extension” implies that the current trend type can be completed at any time, the key to judging whether it has ended is whether a new Chan Zhong Shuo Chan central is formed. Additionally, since a trend contains at least two Chan Zhong Shuo Chan centrals, and a consolidation contains only one, the key to distinguishing between trend and consolidation is whether a new Chan Zhong Shuo Chan central appears. Therefore, the core issue in technical analysis is the “Chan Zhong Shuo Chan central,” and once this is resolved, many difficult judgments become straightforward.

(Note: To determine the end of consolidation extension, look for the formation of three buy-sell points. To determine the end of trend extension, look for a pullback to the trend central—three buy-sell points—or an expansion into a large central after extension or a non-standard trend extension of nine segments. A trend with extension possibility after three buy-sell points—either the central moves upward or the large central expands—while a consolidation does not extend after three buy-sell points.

In short, whether the sub-level trend or the current level can return to the central zone is the criterion. When the trend type returns to the central zone, the trend extension ends. When the consolidation type cannot pull back to the central zone at the sub-level, the consolidation extension ends.

“Trend Central Theorem I”: In a trend, connecting two same-level “Chan Zhong Shuo Chan centrals” must involve trend types at a lower level (Note: sub-level and below).

Using proof by contradiction, the proof of this theorem is simple, and it also answers the previous chapter’s question: “Connecting two adjacent same-level Chan Zhong Shuo Chan centrals—must it be a trend? Must it be a sub-level trend?” First, it is not necessarily a trend; any trend type is possible, even a new Chan Zhong Shuo Chan central formed after a gap. Second, it does not have to be a sub-level; as long as it is below the current level, such as a gap, it belongs to the lowest level. For example, on daily or weekly charts, it is not a sub-level. Finally, the lower the level of the connected trend types, the greater their strength, which explains why gaps have strong technical significance in analysis.

From the definition, the reason for the formation of a “Chan Zhong Shuo Chan central” and its judgment criteria—its “birth”—are already resolved. The remaining questions are about its “maintenance,” “break,” and “extinction.” That is, how a “Chan Zhong Shuo Chan central” is “sustained” and ultimately “broken” and discarded. First, consider its “maintenance.” A sufficient and necessary condition for maintaining a “Chan Zhong Shuo Chan central” is that any trend type leaving this central must be of a lower level and return via a lower-level trend type. This is easy to prove because whether leaving or returning, if the trend type is of the same level, it implies forming a new “Chan Zhong Shuo Chan central,” which contradicts the premise of the original central’s maintenance. This proposition can be stated as:

“Chan Zhong Shuo Chan Central Theorem II”: In consolidation, whether leaving or returning, the trend type must be of a lower level.

From this, the answer to the previous chapter’s third exercise—“How are the high and low points of consolidation formed?”—becomes clear: regardless of the level of the trend type leaving or returning, on the lowest level (e.g., 1-minute chart), the final connection point of the trend types can only be two possibilities: oscillation with more than three overlapping 1-minute K-lines, or a V-shaped pattern with fewer than three overlapping 1-minute K-lines. In the first case, the extreme position of the most extreme overlapping K-line forms the high or low point of the consolidation; this is relatively rare. In the second case, the extreme of the V-shaped peak K-line forms the high or low point, which is very common. This explains why true lows and highs are often fleeting in the market. The theory of this ID can explain any detailed issue on technical charts, which is a hallmark of a true theory. Such a theory does not require Nobel prizes; what is a million dollars in the market? Mastery of such a theory will bring you far greater returns.

(Note: The formation of trend highs and lows is similar. This involves the lowest-level K-line combinations, not just the reasons for high and low points in consolidations.

With these two “Chan Zhong Shuo Chan Central” theorems, proving Theorem Three is straightforward:

The destruction of a “Chan Zhong Shuo Chan central” at a certain level occurs if and only if, after a lower-level trend leaves that “Chan Zhong Shuo Chan central,” the subsequent lower-level pullback trend does not re-enter that “Chan Zhong Shuo Chan central.”

There are only three possible combinations of two lower-level trends in Theorem Three: trend + consolidation, trend + counter-trend, consolidation + counter-trend. The trend can be upward or downward, representing breakouts from above or breakdowns below. From a practical perspective, the most destructive scenario is trend + consolidation. For example, in an uptrend, if a lower-level trend breaks upward and then consolidates with a pullback, the subsequent rise tends to be more powerful—especially if the breakout occurs at the bottom zone. This situation is very common and forms the basis of the theory.