Infinite Cost Line in Stock Market

In the stock market, the “Infinite Cost Line” (CYC∞ line) is a special moving average indicator calculated based on trading volume. Its core function is to reflect the average value of the overall market holding cost, thereby helping investors judge market trends, bull-bear transitions, and potential movements of individual stocks. The following explains in detail from two aspects: meaning and usage:

I. Specific Meaning

1. Definition and Composition
   The infinite cost line is the most important line in the Cost Average (CYC) system, composed of four time-based lines:

   • 5-day, 13-day, 34-day lines: Represent the average building cost for the past 5, 13, and 34 days respectively, reflecting short-term market sentiment.
   • Infinite line (∞ line): Calculates the average cost of all historical transactions, serving as the watershed for long-term bull-bear battles in the market.

2. Key Functions

   • Bull-Bear Divider: When stock prices stand above the infinite line, most investors are in profit, possibly indicating a bull market; falling below the infinite line may indicate entering a bear market.
   • Trapped Position Pressure: When stock prices are above the infinite line, trapped positions and selling pressure are minimal, making it easier for main forces to push prices up; conversely, pressure increases.
   • Health Assessment: When stock prices consolidate above the infinite line with shrinking volume, it indicates profitable holders lack selling motivation, possibly indicating main force control.

3. Difference from Other Moving Averages
   Traditional moving averages (like MA) only calculate price averages, while cost averages are volume-weighted, more accurately reflecting actual holding costs and avoiding false signals.

II. Specific Usage

1. Trend Judgment

   • Bull Market Signal: Stock prices continuously consolidate above the infinite line with shrinking volume, possibly indicating a buying opportunity.
   • Bear Market Warning: Stock prices fall below the infinite line and rebound weakly, possibly the last escape opportunity.

2. Buy/Sell Decisions

   • Breakout Buying: When 13-day or 34-day lines golden cross the infinite line, it may signal the start of a rally. For example, when the 13-day line forms a “bullish arrangement” with the infinite line, it indicates strengthening upward momentum.
   • Consolidation Observation: Stock prices consolidating above the infinite line for more than four days with decreasing volume may indicate main force control, suitable for selective entry.
   • Stop-Loss Principle: When prices fall below the infinite line and rebounds fail to break through this line, be alert to trend reversal.

3. Combining with Other Indicators

   • Combined with MACD: When MACD golden cross (buy) or death cross (sell) occurs, combining with cost average breakout signals can improve win rates.
   • Combined with Volume: When stock prices pull back near the infinite line, observe if volume shrinks; if volume increases on rebounds, the probability of subsequent rises is greater.

4. Special Pattern Analysis

   • Convergence Pattern: When multiple cost averages converge densely, it may indicate main force accumulation or distribution, requiring volume-price analysis.
   • Divergence Pattern: Significant divergence of cost averages upward may signal massive main force holdings.

III. Precautions

1. Avoid Single Dependence: Although cost averages can reflect true holding costs, they need to be combined with overall market conditions (such as sector movements, policy factors) for comprehensive judgment.
2. Long-term Reference Value: The infinite line reflects long-term trends with low sensitivity to short-term fluctuations, suitable for medium to long-term operations.
3. Software Settings: In different trading software, infinite line settings may vary (some software uses “0” or ”∞” to represent), requiring parameter confirmation.

Summary: The infinite cost line is a market average cost watershed calculated through volume weighting. Its core value lies in distinguishing bull-bear markets, identifying main force movements, and avoiding trapped position risks. Investors need to comprehensively apply it by combining moving average patterns, volume, and trend direction to improve trading decision accuracy.

What is the calculation method of the infinite cost line?

According to the information I found, the calculation method of the infinite cost line mainly involves the calculation of the Infinite Cost Average (CYC) in the stock market. Here are the detailed calculation methods:

1. Infinite Cost Average (CYC) Calculation Formula:
   • The calculation formula for infinite cost average is: $\text{CYC} = \frac{0.5 \times H + O + C + 0.5 \times L}{3}$

Where:

• $H$ is the highest price

• $O$ is the opening price

• $C$ is the closing price

• $L$ is the lowest price

  This formula applies to different types of stocks, including top stocks, bottom stocks, and middle stocks. For top stocks, you can use the formula $H+O+C+0.5 \times L$; for bottom stocks, you can use the formula $L+O+C+0.5 \times H$; for middle stocks, you can use the formula $AMOUNT/VOL/100$.

2. Application of Infinite Cost Average:
   • The infinite cost average is an indicator of the total average cost of the securities market. When stock prices are above this average, it indicates most investors are profitable; conversely, it indicates losses.
   • When stock prices continuously consolidate above the infinite cost average with shrinking volume, this is usually viewed as an intervention opportunity, indicating no profit-taking pressure in the market and minimal selling pressure.

Through the above methods, investors can accurately calculate the infinite cost average and use this indicator to analyze market trends and determine trading opportunities.