Pick one level: act only at buy/sell points, let divergence confirm completion, use pivots for stops and targets, and nested ranges for precision.
Chan theory requires one fixed operating level. Choose a level as your main battlefield and base every trading decision on it. The timeframe you currently select is treated as operating level N.
Pivot boxes and buy/sell labels of different levels are shown together, but you act only on operating-level signals; other levels are for reading, not trading.
After choosing a level, decide how moves are decomposed on it. Chan theory has two decomposition modes:
| Your situation | Recommended mode | Reason |
|---|---|---|
| Plenty of time, small capital, high frequency | Same-level decomposition | Mechanical execution: trade every segment, miss no swing |
| Watching big trends, larger capital, seeking trend profit | Non-same-level decomposition | Let pivots grow naturally and follow the trend; no rush to trade every segment |
| Balance trends and scalps | Same-level decomposition at the operating level + multi-level one level down | Big levels set the rhythm, small levels set the precision |
A combination rule that breaks no principle of Chan theory: at the operating level, pivot extension is not defined and consolidation + consolidation joins are allowed, while every level below allows pivot extension and forbids such joins. In practice: same-level decomposition at the operating level sets trading rhythm; multi-level decomposition below it reads pivot extension and expansion for precise positioning. This is another form of nested ranges: big levels set the rhythm, small levels set the precision.
The system draws two trend label lines: the highest-level and the operating-level. Read together, the big direction and current stage are clear at a glance.
Chan theory advises: do not trade inside pivot oscillation; buy and sell only at predefined points.
The system prints 1B/2B/3B and 1S/2S/3S—those are the triggers. No label, no action. Note that local-level buy/sell points always appear with some lag: by the time the label prints, the move has been running for a while. Use divergence or smaller-level nested ranges to position ahead of local-level points.
| Buy/sell points | Original definition | Trading meaning |
|---|---|---|
| 1B / 1S | The turn after trend divergence | Trend over, new move begins. Most aggressive; reversal not yet confirmed |
| 2B / 2S | The retest after 1B/1S makes no new low/high | Reversal confirmed. The safest entry |
| 3B / 3S | After leaving the pivot, the pullback does not return to the range | The pivot is broken and a new trend confirmed. Enter with the trend |
Every fixed signal carries a natural delay: confirmation needs the following movement to play out, so acting only after fixation usually means part of the move is already gone. That is why every signal type comes with an early layer — probe lightly on the warning layer, add on confirmation at the fixed layer. Neither wait for everything to fix, nor go full size on the warning layer.
| Layer | On the chart | Position discipline |
|---|---|---|
| Warning layer | BeiChi / BeiChi_P labels, teal divergence segments, fluorescent-green Pre-end segments | Probe lightly; stop beyond the invalidation level (divergence extreme, 1B low, pivot's upper edge); exit if the warning disappears |
| Fixed layer | 1B / 2B / 3B and 1S / 2S / 3S markers | Add on confirmation; the stop does not move — exit if it breaks |
A warning is a momentum state, not a confirmed signal — it can move or disappear as price develops; that is the structure being revised, not a malfunction. Every signal's invalidation level is visible on the chart: if it breaks, leave — this holds for warning-layer positions as well.
The first principle of Chan theory: every trend type at every level must eventually complete. How do you know it is done? Divergence. A divergence label means the system detected the current move is weaker than the previous same-direction move. Weakening strength means the move is nearly complete and a buy/sell point may appear.
Pivot boxes are not decoration; they are concrete price coordinates. Chan logic: if a buy/sell point is invalidated, the read was wrong.
| Buy/sell points | Invalidation | Stop-loss |
|---|---|---|
| 1B | Divergence point broken (divergence void) | Below the divergence extreme |
| 2B | Retest low broken (reversal failed) | Below the retest low |
| 3B | Pullback returns into the pivot range (breakout failed) | Below the pivot upper edge ZG |
The divergence-turn theorem says the rebound after divergence returns at least to the previous pivot's DD—the weakest case.
| Buy/sell points | Weakest target | Normal target |
|---|---|---|
| 1B (bottom divergence) | The previous pivot's DD | Back inside the pivot range |
| 2B | Pivot upper edge ZG | Prior high or pivot upper edge |
| 3B | No same-level pivot in the breakout direction = move not finished | Hold until a new pivot or divergence appears |
Nested ranges use big levels for direction and small levels for exact points, down to the order book. The chart shows pivots and buy/sell points of several levels plus the highest-level and operating-level trend lines at once—precisely so you can work nested ranges.
Multiple levels are shown together, so nested ranges work on a single chart without switching back and forth. You can also change timeframes to change levels for a fuller multi-level view.
Chan theory calls pivot oscillation the theoretical paradise of scalping: exit in the sell area of the upward leaving segment, and the following oscillation usually offers a chance to buy back.
The small-level 1B/1S and 3B/3S labels inside the pivot box are the scalp triggers: sell when a small-level sell point appears near the pivot's upper edge, buy back when a small-level buy point appears near the lower edge.