Why do sector stocks rise and fall together? The essence is the price comparison effect in economics, a must-understand concept for ultra-short-term trading.

Many friends who trade ultra-short-term notice a phenomenon: in a sector, as soon as the leading stock hits the daily limit, other stocks in the same sector quickly follow and rally; conversely, if the leader breaks the limit or drops sharply, the entire sector crashes together.

Everyone calls this linkage, but it’s not some mysterious stock market phenomenon; it’s the fundamental, down-to-earth logic of economics: the price comparison effect. Today, I’ll explain it thoroughly in the simplest terms.

1. What is the price comparison effect in the stock market?

Simply put, the price comparison effect means:
The same thing shouldn’t be priced too far apart. If the price difference is too large, capital will push the prices to converge.

Examples:

• Market: If the neighboring pork sells for 20 yuan per jin, and your quality is the same but you sell for 12 yuan, your stock will be snapped up immediately.
• Clothing store: The same down jacket, Store A sells for 800, Store B sells for 500, customers will flock to Store B.
• Second-hand housing: In the same neighborhood, same layout, one sells for 3 million, you list for 2.2 million, it will be sold in a day.

In the stock sector, the principle is exactly the same:
Stocks with the same theme, concept, or main business are seen by capital as “similar products.”
When the leader rises and hits a high, it sets the price for the entire sector.
Stocks that haven’t risen, are lower in position, or have smaller market caps are seen as “bargains” and are pulled up to catch up.

This is the economic essence of sector linkage.

2. Why do stocks within a sector tend to rise and fall together?

Because, in ultra-short-term trading, a sector is viewed as a whole pricing system, not as individual stocks.

1. When rising: The leader sets the high, and the smaller stocks fill in the gap

When a leader hits the limit, continues to hit multiple limits, and keeps making new highs, the market automatically does a calculation:

• The leader has hit 3 or 5 limits in a row
• Another stock in the same sector, with similar logic and theme, is still unchanged
• A large “price gap” appears between them

Capital is profit-driven; where there’s a price difference, capital rushes there.
So, when the leader can’t go higher, funds start buying lower-priced stocks; when they can’t buy the leader, they chase the trend.
Chasing the trend isn’t because the stock is strong, but because it’s “relatively cheap.”
This is how we see the leader driving the entire sector upward.

2. When falling: The breaking of the anchor point causes a full retreat

The price comparison effect works both ways—it can push prices up or pull them down.

Once the leader weakens, breaks the limit, or plunges, it means:
The entire sector’s pricing anchor has collapsed.

Previously, smaller stocks could rise because the leader was worth that price;
Now, if the leader isn’t worth it, why should the smaller stocks be expensive?
Capital will quickly exit, smashing the inflated parts back down to restore value.

That’s why you see: when the leader drops, the whole sector turns green.
This isn’t coincidence; it’s an economic law.

3. Practical ultra-short-term trading: How to use the price comparison effect?

Once you understand the price comparison effect, viewing sector linkage becomes like having X-ray vision. Here are three practical tips:

1. First look at the leader, then at the smaller stocks

Without a leader, price comparison is meaningless.
If the leader doesn’t fall, the sector won’t collapse.
For catching the bottom, wait until the leader shows room to rise before acting—that’s the safest approach.

2. Find stocks with “similar logic and low position,” they’re easiest to profit from

The most profitable part of the price comparison effect is catching the rebound.
Within the same sector, the stocks most similar to the leader, with the lowest position, or smallest gains are the most likely to be targeted by capital.
No guessing, no gambling—where the price difference is, the opportunity is.

3. Follow the leader’s mood, don’t look at individual K-line charts

When chasing stocks, 90% of the time, don’t look at their own charts; focus on the leader.
If the leader is strong, it won’t weaken; if it crashes, it can’t hold.
In ultra-short-term trading, remember: don’t look at technicals, look at price comparison.

4. One sentence summary: Sector linkage is driven by the price comparison effect

Next time you see a sector rally or plunge collectively, don’t see it as mysterious.
It’s just the simplest economic principle:

Similar assets’ prices will naturally converge.
Rising fills the undervaluation;
Falling squeezes out the overvaluation;
Linkage is the price comparison effect working in real time.

One last note: don’t statically apply the leader’s price change to the chasing stocks’ movements.
Because, from a multi-dimensional perspective, other factors like sentiment premium, popularity premium, scarcity, share structure, trend inertia, and more must also be considered.

For real trading, articles may be messy; just take it as a rough guide. Beginners should think independently; experienced traders, proceed with caution.