Do Not Engage in Hasty Trading
In the stock market, prudence is fundamental, as it is the foundation of weightiness; calmness is crucial, as it is the determinant of impatience.
A skilled investor never forgets to make prudent decisions when trading daily. Although their operations may appear splendid, they can remain composed because of their careful decision-making. If one wishes to achieve something in the stock market, why engage in hasty trading?
Hastiness leads to the loss of the foundation for standing in the stock market, and impatience leads to the loss of one's true nature.
Engaging in hasty trading is a common weakness among many investors, especially those who are new to the market. They eagerly follow when they see stock prices rising, and hastily sell when their stocks fall. They do not have sufficient reasons to convince themselves about why they are buying or selling a particular stock, and their trading decisions are made impulsively, leading to trading errors.
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A stock market adage goes, "Picking stocks is like choosing a spouse." This proverb emphasizes the importance of carefully selecting stocks for investment and trading. To choose a good wife, one who will be a partner in life and career, sharing joys and sorrows, and accompanying oneself through a long life, is not something that can be done casually by just finding any woman. A wife should share the same interests and temperament to be able to spend a lifetime together.
The same applies to selecting stocks. One must understand the company's operational status, performance, and development; understand its stock nature; and judge whether it is the right time to buy and whether it has the potential to be popular among the public. In terms of stock nature, one should also consider choosing stocks that suit their investment method. For example, long-term investors should buy growth stocks with good potential and broad development prospects when the prices are low. If one chooses a speculative stock hastily, it is difficult to determine its future direction. Conversely, short-term speculators cannot buy stable growth stocks like long-term investors, as these stocks have minimal short-term differences and are not suitable for short-term speculation. Instead, they should choose theme stocks or speculative stocks to dance with the market.
Some investors engage in hasty trading in the market without careful research and analysis, swinging from one side to another, and building one wall while losing another. Without a set of their own trading strategies and plans, how can they avoid losses?
Let us recall the famous quote from investment master Warren Buffett: If you cannot explain the five reasons for buying a stock to a child within two minutes, you had better not buy it.Every investor, when buying or selling stocks, should take this timeless adage as a mirror, carefully considering their reasons for buying or selling. If they cannot fully convince themselves with five compelling reasons, then they should not make hasty decisions to buy or sell.
Before selling a stock, one should consider it maturely from five aspects before making a decision:
(1) Is the market showing signs of a top?
(2) Has the company's operations indeed encountered significant problems, such as operational difficulties, deteriorating financial conditions, or being in a sunset industry?
(3) Is this stock a stock without any distinctive features or representativeness?
(4) Is the price of this stock too high in terms of its investment value?
(5) Has the main force of institutions abandoned this stock? For example, if the market capitalization is too large, the market image is poor, and the market manipulators cannot control the stock.
If the reasons are sufficient in the above points, one can decisively buy or sell; rather than making transactions rashly.
When buying a stock, investors should consider the following five perspectives to determine whether the stock they want to buy is worth buying at the current time:
(1) Is the market starting or about to start? Because some stocks, even if they are of high quality, will not rise if the overall market does not cooperate.(2) Do you understand this company? This includes its operational status, financial condition, and especially its future development prospects. Can it continue to grow in its operations?
(3) Does this stock have representativeness in the industry, is it a leading stock in this sector? If there are more representative stocks, it is better to choose the latter over the former.
(4) Is this stock currently at a low point, with significant investment value? Of course, the so-called investment value is also relative, it is compared with its growth potential, and cannot be measured solely by the static price-to-earnings ratio.
(5) Are major institutions interested in this type of stock? Such as the structure of the plate, the market value of circulation, the market image, etc. Of course, this aspect also needs to be considered comprehensively.
Retail investors have several fatal loss-making thinking patterns:
1. Fondness for bottom-fishing
They like to bottom-fish, especially for stocks that are at historical lows. Seeing that their cost is lower than others, they are delighted. However, they fail to consider that if a stock has already reached a historical low, it is very likely that many new lows will appear, and even your stock may be halved in a few months. Bottom-fishing, bottom-fishing, and in the end, it traps oneself.
2. Reluctance to cut losses
Some retail investors, after cutting losses once, see the stock price rise again after a few days, and the next time they will not cut losses with a fluke mentality, which is not acceptable. As for me, I never allow a loss of more than 5%. "Cut losses and let profits run" is indeed a profound truth. But on the other hand, if you don't have your own profit model, your end will be to buy, cut losses, buy again, and cut losses again.III. Holding Too Many Stocks
Holding too many stocks is mainly due to the lack of one's own stock selection method, and stock trading relies on others' recommendations.
IV. Unwilling to Miss Every Opportunity
Unwilling to miss every opportunity, seeing the market rise a bit, they rush in hastily, without understanding their own chances of winning. As a result, they are trapped again. In fact, this is due to low level and lack of confidence. If you can have several profit models applicable to different market environments, then no matter whether the market rises, falls, or consolidates, you have a stable way to make profits. You can calmly wait for the uptrend to form before entering and minimize the risk.
V. Unable to Distinguish Between Bull and Bear Market Trading Methods
Unable to distinguish between bull and bear market trading methods, retail investors always have a bullish mentality, always thinking about rising the next day. In the Shanghai and Shenzhen stock markets, the short bull and long bear are the unchanging main theme. Institutions like to sing more, because only when retail investors do more, do they have food to eat. For us retail investors, it is most important to keep an eye on your wallet. What we need to do is to be like a cheetah, never act when the time is not ripe, and once we act, we must have at least more than 70% of the winning odds. In the Shanghai and Shenzhen stock markets, there are actually some methods with a winning rate close to 100%, although the frequency of appearance is low, but if you can grasp it, it can bring you about ten points of income on average every year.
Be Firm in Doing Short-term Trading and Avoid These "Six Do Not Touch"
1. Head and Shoulders Pattern with a Big Dark Line
This pattern is usually that the first day appears a big positive line, and the second day appears a big dark line that completely eats the first big positive line. This pattern appears at a high position, which is a signal to sell. On the third day, when the stock price is about to close with a dark line, investors can confirm.2. Gap Up with High Volume and Big Bearish Candle
After a stock has been continuously rising and has approached the target price set by the main force, if there is a significant positive news release, the stock will open with a gap up, continue to rise, and even hit the upper limit, but the upper limit is continuously opened, and under the strong selling pressure, it will gradually retreat and finally close with a big bearish candle. Afterwards, the stock price will continue to fall, followed by a long period of adjustment.
3. Three Black Crows
This pattern is composed of three medium bearish candles, with each candle's opening price cutting into the previous bearish candle, and the shorter the upper and lower shadows, the better. If this pattern appears at a high position, it indicates that the overall trend may be about to reverse or the stock price is about to fall, and investors should reduce their positions and exit.
4. Dark Cloud Covering
This pattern is formed by a combination of two K-lines, usually with a bullish candle appearing on the first day and a bearish candle on the second day, with the bearish candle's body cutting into more than 50% of the previous day's bullish candle's body, and the trading volume is relatively large.
When this pattern appears at a relatively high position, it indicates that the bearish force is relatively strong, and the stock price may reverse at any time, and investors should exit in a timely manner.5. Engulfing Pattern
This pattern is composed of two candlestick lines, but it differs when it appears at a low level. On the first day, a bullish candlestick appears. On the second day, regardless of whether a bearish or bullish candlestick appears, it is engulfed by the previous day's bullish candlestick, meaning that the highest and lowest points of the second line do not exceed the highest and lowest points of the first bullish candlestick. This pattern often marks the beginning of a trend reversal, so investors should consider selling stocks at this time.
The engulfing pattern can also transform, so investors should pay attention. As long as an engulfing pattern appears, regardless of whether the two candlestick lines are bearish or bullish, it is a reversal signal. Investors can buy on the dip at the bottom and sell on the rise at the high level.
6. Island Reversal Pattern
If this pattern appears at a high level, it signifies the beginning of an intermediate or larger adjustment trend. The stock price is in the final stage of an uptrend, with the bullish forces exhausted, making a last effort. As a result, the stock price gaps up, opens high and rises, but soon the stock price gaps down under the pressure of the bearish side, leaving a lonely island pattern above.
After this pattern appears, investors should resolutely reduce their positions even if they have to cut their losses, because the large adjustment trend is fierce, and the correction range is extremely deep. If investors are slow to act, they are likely to be trapped, resulting in significant losses.
Three Patterns of Washing in Intraday Charts
1. Arch-shaped Washing
(Note: The original text was cut off before it could be fully translated.)The "arch-shaped" washout refers to a stock price that follows a pattern throughout the day: it opens low, rises, and then closes low in terms of intraday trend. The trading characteristics are often marked by small orders that push the price up and large orders that push it down. The purpose of pushing the price down is to scare out the profit-taking positions, with both buying and selling activities appearing in small order sizes.
Purpose: To create the illusion that the main force in the market is raising the price to sell.
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The "U-shaped" washout refers to a stock price that follows a pattern throughout the day: it opens high, falls, and then closes high in terms of intraday trend. The trading characteristics are often marked by large orders that break through key price levels, with small orders conducting non-intensive transactions, and large orders showing a situation where they are hung but not traded.
Purpose: To create the effect of a negative line on the intraday K-line.The "U" shaped washout has its center of gravity mostly downward, and its main purpose is to shake out the profit-taking positions; the arch-shaped washout has its center of gravity mostly upward, and its main purpose is to shake out the trapped positions—the difference between the two is: the arch-shaped washout often has a larger volume of transactions at the neckline of the K-line pattern; while the "U" shaped washout is mostly in the upward channel, with not a very large volume of transactions.
Third, "U" shaped + arch-shaped washout
This actually refers to the combination of the two basic washout shapes, which can be "U" shaped + arch-shaped; it can also be arch-shaped + "U" shaped. Its market characteristics are similar to the pure "U" shaped and pure arch-shaped—one but the market often has an additional characteristic, that is, the phenomenon of large orders hanging but not trading or trading without hanging (transactions in the air).
Purpose: To create the illusion of the main force's large-scale shock and delivery.Special Note:
Whether it is a "U" shape followed by an arch shape, or an arch shape followed by a "U" shape, it is a compound type of washing plate pattern. The purpose is to wash out both the profit-taking and the trapped positions at the same time, which is different from the pure "U" shape mainly washing out profit-taking positions and the pure arch shape mainly washing out trapped positions - its large order transactions should be relatively more, and the upper and lower pressure plates should be more frequent.
Intraday chart operation basic forms:
1. Flat opening and rising.
When the market is on the rise, if a stock opens flat and rises, and the pullback does not break the opening price, the stock price rises again, indicating that the main force is determined to do more. When the second wave of high points breaks through the first wave of high points, investors should add positions to buy.
2. Low open and rising.If a stock in the plate pulls back up more than half of the drop, and the stock price can't fall back when it corrects, it indicates that the main force is very confident in doing more, and you can follow up with an internal plate near yesterday's closing price.
3. When the market is falling, if a stock opens low and goes low, breaking through the previous wave's low point, it is mostly that the main force is not optimistic about the market, and there is its weakness or there is a substantial bearish news released. If it opens low and goes low, and the rebound cannot exceed the opening, it is mostly that the main force is leaving the market to watch. If it breaks through the first wave's low point again, it should be (sold at the market price).
4. A stock in a low position box trend, opens high and goes low, opens flat and goes flat, opens low and goes flat, can follow up when it breaks up.
But if it is a high position box break, attention should be paid to the risk (if the stock price trend of the day is flat, it is best to watch, to prevent the main force from oscillating and selling goods). But if there is a large volume of upward breakthrough, especially, the high position box has a transaction volume of about one year, it is either open or flat, and the time has already exceeded 1/2, it becomes a selling point and turns into a commission order. When the box top high price appears, it can (follow up with the external plate). If it opens low and opens flat, in principle, it is only seen as a weak stop and stabilizes the market, and you can participate in a small amount, and fight for its rebound, do not follow up in large amounts.
5. In the rising trend, if it opens high and goes low, and the second rebound cannot create the highest, if a large amount is released, it should be sold at the high position of the second rebound reversal, the main force uses the high opening to attract investors to chase the rise and follow the trend, and takes the opportunity to release a large amount, which is a common trick, and can refer to the trend of the previous period's ex-right stock in the plate.
6. If a stock forms a triple top, a head and shoulder top, a round top, it should be decisively sold when it breaks through the neckline, and sold when the stock price is pulled back to the neckline after breaking through and the rebound is powerless.7. When the overall market is weakening, if a stock opens high and then falls into the red, and the rebound fails to turn it back to the black, investors should take profits when it cannot turn back to the black to avoid being trapped at a high position in a weak market.
8. When a stock is in a box pattern and its trend is falling, sell at the bottom of the box, regardless of whether it opens high and goes flat, opens flat and goes flat, or opens low and goes low. Especially when the box shows significant fluctuations, once the support at the bottom of the box is lost, it indicates that the main force has lost its ability to protect the market. At least in the short term, it is bearish, implying the start of a new downtrend. Investors should resolutely cut their positions and exit.
Several years of stock trading experience in making money from stocks:
1. Don't hold too many stocks
Many retail investors don't have a lot of capital, but they hold many stocks. There are at least 4-5, and up to 7-8, saying that you can't put all your eggs in one basket, in order to diversify risks. In fact, it's not the case. Holding many kinds of stocks with a small amount of capital does diversify risks, but also diversifies returns. The effect of holding many kinds of stocks is the seesaw phenomenon, which will make you unable to take care of both ends, and the difficulty of operation is increased.
For example, if you marry eight wives like Wei Xiaobao, can you take care of them all? Therefore, it is recommended to hold no more than three stocks, and those with less capital can choose 1-2 carefully, concentrate firepower, concentrate energy, and the probability of winning is greater.
2. Tips for buying and selling stocks
When buying stocks, you should be patient and buy at a low price, enter in batches and buy gradually, and never make a one-time deal, otherwise there will be no room for maneuver. If the stock rises to a high position, sell decisively. Learn some technology appropriately, but don't rely too much on technology, many K-line charts are drawn by the market manipulators, and they will deceive you without any discussion.3. Never go all-in
The principle of cash is king is never wrong. In the previous phase of the "Lantern Festival market" that was expected to hit 3000 points, many retail investors were seen to be full of confidence and fully invested, waiting for the rise. Looking back now, it is indeed very dangerous. Of course, you can go all-in if you have 100% certainty. But who in the stock market has 100% certainty? Unless you are the big player, then you are not a retail investor. The advantage of going all-in is that you can earn more, but the disadvantage is that if the stock price falls, you will lose more, and there will be no room for maneuver. You either shrink your full position or have no choice but to cut your losses.
4. Earning is a victory
New investors should not expect too much when they first enter the market. The first thing to care about is not how much you earn, but to avoid losses. No matter how much you earn in each transaction, as long as you earn, it is a victory. There are often myths in the stock market, and there are also many stock gods. Don't envy how much others earn, and grasping yourself is the most important.
5. Invest in stocks with a normal heart
Don't lose balance, seeing other stocks rise, and your own stocks are flat every day, so you change your stocks into strong stocks, but the stocks you just threw out have begun to soar, which is a manifestation of losing balance. Wanting to make money quickly is not a bad thing, but if you can get a stable return every year, your speed will be much faster than catching the daily limit. If you lose balance in your heart, your pace may become chaotic, and your operations may often make mistakes.
"Opportunities are not to be missed, and time will not come again." This sentence is not applicable to the stock market.
The stock market always has opportunities, and different periods of the market will always breed different hot spots. Missing an opportunity is not important, and there will be the next opportunity waiting for you. When you lament that you did not grasp a big bull market, in fact, the opportunity to short has quietly come. Investors from the securities market do not have to worry about the lack of opportunities to rise, and opportunities are available every day.
The key to seizing opportunities in the stock market lies in precision rather than quantity, because no one can win every battle, and profits are accumulated on the basis of a higher investment success rate. Therefore, the analysis and research process before investment behavior is more important than the investment behavior itself. It may seem that some opportunities are missed during the analysis and research process, but this is not a problem. Objectively, it is impossible to grasp all opportunities, and you just need to do your best to grasp the opportunities that belong to you.Investing not only tests a person's patience, but sometimes it also tests a person's determination and decisiveness when opportunities arise. Investors need to find a balance between patience and determination, to bide their time when necessary and to act decisively when the time is right.
Have you heard of the fairy tales of Hans Christian Andersen from Denmark? There is a story about a pair of red dancing shoes in the fairy tales. Whoever wears these red dancing shoes will keep dancing until they die.
The charm of the stock market lies in this: opportunities for fluctuations are everywhere, and participants see opportunities everywhere. If you can't control it, until your capital rights and interests are used for forced liquidation by the company, in fact, many operators also end up like this.
What the stock market lacks is not opportunities, but capital, and even more so, patience. The operation is a competition of patience, and whoever has patience is the ultimate winner in the negotiation. Easterners, especially the Japanese, are often the ultimate winners in business negotiations, relying on this kind of patience that scares white people.
I have seen many patient friends who have increased their capital with this patience, and I have also seen many patient friends who, due to lack of skills and inability to understand the market, dare not unlock their locked positions until the delivery month, which is quite amusing!
"To make money in the speculative market, you must do the right thing at the right time." Even if an excellent trader has made an accurate prediction of the future market at the beginning of the trend, it is best to wait until the trend is determined and there are no violent fluctuations before entering the market. The great trader repeatedly emphasizes the importance of choosing the right market entry time, and he uses his own painful experience as an example; in 1906, he correctly predicted the arrival of the stock bear market, but he went bankrupt because he entered the market too early and shorted, "just went bankrupt"!
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