Life is like gambling, and it's all about the mindset. When you win, you should be bold; when you lose, you should be decisive. —— "The Godfather"

There is a saying in the market that "the stock market is a big casino," and some investors have said, "Our country's stock market is not even as good as a casino." Especially when the market conditions are not good, some stockholders joke, "I went in with a BMW, and came out pushing a bicycle." So, is our country's stock market really as treacherous as some stockholders say?

We have already said that all stock markets are arenas for capital games. Where there are winners, there are losers, and this is inevitable. Therefore, every country's stock market will have investors who lose everything, and every country's stock market also has some wealth legends. On the other hand, since the establishment of China's stock market in 1990, it has only a history of more than 20 years, while the New York Stock Exchange in the United States can be traced back to the late 18th century, with a history of more than 200 years. The famous Dow Jones Index was published in 1884 and has a history of more than 120 years. China's A-share market was established relatively late and has developed rapidly. It is inevitable to go through a process of continuous exploration and improvement in various systems. In this process, there will be loopholes, and some smart investors will use some so-called loopholes to make profits. However, as the system becomes more and more sound, such loopholes will become fewer and the market will become more and more fair.

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Stock trading can make people rich overnight, but it can also make people bankrupt, which makes people easily associate stock trading with gambling. In the consciousness of most people, the risk of stocks is either overestimated or underestimated. This is closely related to the generally low level of investment of investors in our country. In fact, like bonds, stocks are also an investment variety. Although the risk of stocks is higher than that of bonds and the return rate is unstable, as long as you can grasp the overall economic trend and follow certain principles, you can usually enjoy the fruits of economic growth. A large part of the risk comes from not understanding stock trading and losing control of oneself.

For the definition of gambling, if gambling is defined as a betting game, there are many similarities between stock trading and gambling. We hope that investors can correctly and actively view the topic of this section. In fact, both stock trading and gambling are games of chance. In the casino, participants can be called gamblers or speculators, but here, we are talking about how to do a good job in stocks, how to participate in this game of chance. The participants of gambling here refer to theoretically smart game players, not gamblers. What we are looking for is a reasonable and rational betting method aimed at making a profit. Of course, if you lose control in the stock market, you are a "gambler." Our goal is to be a rational game master and avoid becoming an irrational gambler.

Stochastic Indicator - KDJ

The stochastic indicator is one of the technical analysis indicators. The stochastic indicator, referred to as KDJ, is sometimes also called KD, proposed by George Lane, and is a commonly used technical analysis tool in the futures and stock markets. The stochastic indicator integrates the advantages of momentum concepts, relative strength index, and moving averages in its design. In the calculation process, it mainly studies the relationship between high and low prices and the closing price, that is, by calculating the real fluctuation range of the highest price, the lowest price, and the closing price of the current day or the recent several days, it reflects the strength and overbought and oversold phenomena of the price trend. It is usually suitable for short-term investors for reference.

The stochastic indicator is usually placed at the bottom of the large market or individual stock moving average chart, consisting of three lines: K, D, and J, as shown in the lower part of the figure in the oval area.Set the fast line K and the slow line D in the chart, as well as the J line that examines the positional relationship between K and D. Mark the values of K, D, and J on a Cartesian coordinate system with time as the horizontal axis and the KDJ indicator values as the vertical axis.

Parameter Settings for the KDJ Stochastic Indicator:

In general analysis software, the system default parameters for the KDJ indicator are (9, 3, 3). From a practical perspective, the daily K-line KDJ indicator formed by this parameter setting has the drawbacks of frequent fluctuations, being overly sensitive, and having too many false signals. Because of this, the KDJ indicator is often overlooked by investors, who believe that this indicator does not have much value. However, in fact, if the parameters of the KDJ indicator are modified, it can be found that this indicator still has a good effect on judging the price trend.

According to calculations by market technical analysis professionals, selecting the following values for the daily K-line KDJ indicator parameters can achieve good results: (6,3,3), (18,3,3), (24,3,3). Investors can flexibly set the parameters of this indicator according to different stocks and different time periods.

1. KDJ indicator set with (6, 3, 3) as parameters

The sensitivity to price fluctuations is enhanced, and its frequency of change is very high, making it suitable for short-term traders to find buying and selling points. Generally speaking, every intersection of the three KDJ lines in the overbought and oversold areas may become an important operational timing.

2. KDJ indicator set with (18, 3, 3) as parameters

It has the advantages of stable signals and not low sensitivity, and it is applicable in most cases. An important operational principle for the KDJ indicator set with this parameter is: when the indicator is below the 20 oversold area and a bottom divergence appears, it should be bought; and when it is above the 80 oversold area and a top divergence appears, it should be sold.

3. KDJ indicator set with (24,3,3) as parameters

It excludes false signals caused by price fluctuations to a greater extent, and using it to find medium-line buying or selling points is a good choice.Investment Key Points After Parameter Settings

1. KDJ Indicator Set with Parameters (6,3,3)

Due to multiple crossovers that may occur during price movements, signal distortion can easily occur. Therefore, investors need to have sufficient practical experience, and beginners should generally not attempt it lightly.

2. KDJ Indicator Set with Parameters (18,3,3)

When using it, the following operational principles must be followed:

(1) The indicator's crossover must occur in the oversold or overbought area to be considered a valid signal.

(2) When a crossover occurs at the bottom, two crossovers should be regarded as a good buying opportunity.

(3) When a crossover occurs at a high level, two crossovers should be regarded as a good selling opportunity.

3. Consider Setting Overbought and Oversold Zones

Whether it is a broad market index or a single stock, when looking for medium-term buying or selling points, the issue of setting overbought and oversold zones should be considered. Traditional KDJ indicator theory believes that when the KDJ value is above 80, it is an overbought area, and selling operations should be made. When the KDJ value is below 20, it is an oversold area, and buying operations should be made. In fact, the oversold area of the KDJ indicator set with parameters (24,3,3) should be below 10, not 20, and the overbought area should be above 85, not 80.Analysis Essentials of the KDJ Indicator:

1. The KD line values are confined within the range of 0 to 100, and they are divided into three areas: the part exceeding 80 is defined as the overbought area, the part below 20 is defined as the oversold area, and the rest is the oscillation area.

2. Buy and sell signals of KD: The general standard is that when the K line is above 80 and the D line is above 70, it is an overbought signal (excessive buying of a certain stock is called overbought), and the stock price may fall, so it is appropriate to sell the stock in time; when the K line is below 20 and the D line is below 30, it is an oversold signal (excessive selling of a certain stock is called oversold), and the stock price may rise, so it is appropriate to buy the stock in time.

3. KD crossover signals: When the K line crosses the D line from a low position, it appears as a golden cross, which is a buy signal (as shown in the right oval in the figure); when the K line crosses the D line from a high position, it appears as a death cross, which is a sell signal.

4. J indicator values: When the J indicator is greater than 100, it is overbought, which is a selling opportunity; when it is less than 10, it is oversold, which is a buying opportunity.

5. Divergence judgment: When the stock price rises layer by layer, and the KD line falls layer by layer (or vice versa), a "price line" divergence occurs. This indicates that the stock market trend is about to change, entering a bullish or bearish position.

KDJ Indicator Buy and Sell Points (Graphical)

The KDJ indicator consists of three indicator curves: K, D, and J. Among them, the indicator line J has the largest fluctuation, the indicator line K is the next, and the indicator line D is the smoothest, as shown in Figure 1.

The KDJ indicator uses the actual price fluctuations to reflect the comparison of the strength of the buying and selling sides in the market. In the calculation process, only the recent highest price, lowest price, and closing price are considered. Its characteristic is that it can quickly and intuitively judge the market situation.The Golden Cross and Death Cross of the KD Indicator Line

The golden cross and death cross of the indicator lines K and D in the KDJ indicator are the most widely used patterns in the application of the KDJ indicator.

When the indicator line K crosses the indicator line D from below upwards, the golden cross pattern appears. This pattern indicates that public sentiment is rapidly gathering in the short term, which is a short-term buy signal.

Corresponding to the golden cross, when the indicator lines K and D appear at a high position, the death cross signal indicates that the panic atmosphere in the market is rapidly gathering in the short term, which is a short-term sell signal.

When investors use the golden cross or death cross pattern of the KDJ indicator in actual combat, they should pay attention to the following three points:

First, the position of the intersection. The lower the golden cross position, the more reliable the short-term buy signal; the higher the death cross position, the more reliable the sell signal. The golden cross can only be considered as a bullish signal when it appears in the area below 50. The golden cross appearing in the area below 20 has the strongest bullish signal. The death cross can only be considered as a bearish signal when it appears in the area above 50. The death cross appearing in the area above 80 has the strongest bearish signal.

Second, the direction of the indicator line D. When forming a golden cross, the indicator line D must be rising; when forming a death cross, the indicator line D must be falling.

Third, signal distortion. When the stock price is in a horizontal fluctuation trend, the indicator lines K and D will often entangle together, repeatedly crossing, and the golden cross and death cross at this time lose their reference value for buying and selling.

On December 24, 2009, the KDJ indicator of Xin'an Shares (600596) showed a golden cross at a low position. This pattern indicates that public sentiment is rapidly gathering, which is a short-term buy signal. In January 2010, the KDJ indicator repeatedly crossed at a high position. Although there were golden cross patterns during this period, they did not have reference value.On April 22, 2010, the KDJ indicator for Suchangchai A (000570) showed a death cross at a high level. This indicates that the market's panic atmosphere is quickly gathering, which is a signal to sell. After seeing this signal, investors should sell their stocks as soon as possible.

Overbought and Oversold of the J Line

The simplest use of the J line is to determine the top and bottom of the stock price. When the J line is higher than 100 or lower than 0, it indicates that the current market is in an abnormal trend. This abnormal trend is called the overbought and oversold phenomenon.

The overbought phenomenon refers to the extreme strength of the bulls, and all the funds that can be mobilized in the market have already bought stocks. It is difficult for the stock price to rise and gain new driving forces. On the contrary, if new bearish forces appear, the stock price will be continuously suppressed.

The oversold phenomenon is the opposite of the overbought phenomenon, which means that the bearish forces are extremely strong. If new bullish forces appear, the stock price is expected to be continuously lifted.

If the J line is above 100 for 5 consecutive trading periods, it indicates that the stock price has been continuously lifted, which is a signal of a strong overbought phenomenon in the market. After that, once the J line falls below 80, investors can consider that new short positions have entered and should sell stocks.

If the J line is below 0 for 5 consecutive days, it is a signal of a strong oversold phenomenon in the market. Once the J indicator breaks through 20, investors can consider that the uptrend has arrived and should buy stocks.

As shown in Figure 4, from September 22 to 29, 2009, the J line of Cinda Real Estate (600657) was less than 0 for 6 consecutive trading days. This indicates that the market sentiment has reached an extremely low point, and the stock price is in a state of zero oversold.

On October 9, the J line continued to rise and broke through the oversold boundary of 20. This indicates that the market sentiment has gathered, forming a buy signal. At this time, investors can buy stocks.As the stock prices rose, from October 16th to 22nd, the indicator line J remained above 100 for five consecutive trading days. This is a signal that the market sentiment has reached its peak and the stock prices are in a severely overbought state.

On October 27th, the indicator line J turned downward, breaking through the overbought boundary line of 80. This indicates that the market sentiment is dissipating, and a panic atmosphere is beginning to emerge. Upon seeing this signal, investors should sell their stocks.

KDJ indicator buying and selling points classic illustration:

1. In an upward market trend, use the daily line J to bottom-fish

When the market forms an upward trend on the weekly K-line (with higher bottoms and higher tops), the daily KDJ's J value moves below the 0 line and then crosses back above the 0 line, which is the bottom-fishing buying point.

Buying point principle: When the market forms an upward trend, the main trend is upward. Each adjustment during the rise is an opportunity for us to add positions at a low price. The sign that the adjustment is in place and ends is "J value moves below the 0 line and then crosses back above the 0 line."

2. In a downward market trend, use the daily line J to escape the top

When the market forms a downward trend on the weekly K-line (with lower tops and lower bottoms), the daily KDJ's J value moves to around 100, which is the top-escaping selling point.Selling Point Principle: When the market forms a downward trend, the decline is the main trend, and each rebound during the decline is an opportunity for us to add positions. The judgment of the high position and the end of the trend is when "the J value runs to around 100."

3. Monthly KDJ Index to Distinguish the Market

In trend theory, the monthly line is used to study long-term trends. When the J value of the monthly KDJ is less than 0, the market is in the process of finding the bottom. Subsequently, when the KDJ forms a golden cross, a long-term buying point appears, and the market will rise on a monthly basis.

4. Weekly KDJ to Grasp Mid-term Trading Opportunities

In trend theory, the weekly line is used to study mid-term trends. A mid-term market lasts for three weeks to several months. When the J value of the weekly KDJ index is below 0 and then crosses the 0 line, followed by a golden cross, the market will rise for several weeks, which is a very good opportunity for swing trading.

5. KDJ Golden Cross is the Core K-Line Usage

After the market has undergone a clear adjustment (the J value of the daily KDJ falls below 20), the market closes with a medium-sized Yang line, which is the sign of the rebound. At this time, the KDJ often forms a golden cross, and this medium-sized Yang line is called the "core K-line." It will have a supporting effect on the future market. At the same time, after we buy stocks, we can use the lower edge of the core K-line as the stop-loss position, as the basis for holding shares. This method is more suitable for the daily line!Generally, experts will consider the combination of MACD and KDJ along with trading volume to conduct short-term arbitrage in a strong market and to choose the buying and selling points of medium-term stocks. This method, which is used most frequently and has a high accuracy rate, is a method that arbitrage investors must be proficient in using.

KDJ Ten Experience Summaries:

1. If the 60-minute KDJ is at the 0 column and moves horizontally for 3/5/7 cycles, once the 60-minute J value hits bottom and looks up, it will trigger a rebound that lasts for 2-4 hours; if the daily KDJ indicator also moves horizontally for 3/5/7 cycles and forms a golden cross, the rebound will last for 2-3 trading days. In a strong market, this is an added bonus, but in a weak market, the strength will weaken, and it is important to note that only when the J value forms a golden cross and the K value is more than 20% greater than the D value, this cross is effective;

2. If the 60-minute KDJ turns down from above 80, and the K value crosses below the D value and breaks through 80, while the daily KDJ has just passed 20 but not reached 50, it indicates that the market has a setback, and the market is usually very weak at this time;

3. If the 60-minute and daily KDJ are above 80, and after a long period of consolidation, the K value forms a death cross with the D value at the same time, it indicates that a 2-4 hour downtrend is about to begin;

4. If the 60-minute KDJ falls below 20 and turns up, and the daily KDJ is above 50, it is necessary to observe whether the 60-minute K value will effectively cross the D value (K value is more than 20% greater than the D value). If it is effective, it indicates that a new attack will start; if it is ineffective, it indicates that it is only a rebound in the process of falling, and the market will continue to fall after the rebound;

5. If most of the KDJ of the stocks are around 50, it indicates that the bulls and bears are temporarily in balance. If the 60-minute KDJ stops before 50, and the daily KDJ has just formed a golden cross, it indicates that the market may continue to rise. When the KDJ is running above 50, if the J value rises too fast, turns down and forms a death cross with the K and D values, and then quickly forms a golden cross, it is a buying opportunity, or when the J value dips and does not cross the K and D values and turns up, it indicates that the washing is over and the market is about to rise rapidly. At this time, it is best for the moving average line to be in a bullish attack state;

6. The divergence phenomenon of the 60-minute or daily KDJ can also be used as a basis for judging the top and bottom of the stage. For the short term, look at BIAS, KDJ, and for the medium and long term, look at MACD.

7. In an extremely strong market, the daily KDJ can reach above 90, and repeatedly form ineffective crosses at high positions. At this time, focus on the weekly KDJ. When the weekly KDJ forms a downward cross, it may trigger a deep correction lasting 2-3 weeks.8. During a sharp decline, the 30-minute KDJ can approach a value close to 0, yet the overall trend may still continue to fall. In such cases, one should also observe the 60-minute KDJ. When the 60-minute KDJ makes an effective upward crossover, it can trigger a strong rebound.

9. When the market is in an extremely strong or weak one-way trend, the daily KDJ may repeatedly show dull signals, and it would be advisable to switch to medium to long-term indicators such as MACD. When stock prices fluctuate violently in the short term and the daily KDJ response is delayed, other quick indicators can be used instead. This is what was referred to as the blind spot when I previously taught everyone about indicators.

10. In extremely strong gushing surges, the 60-minute/day/week KDJ symbolically completes a death cross, which is an opportunity to enter the market, because the index basically cannot fall. On the contrary, in extremely weak market crashes, the 60-minute/day/week KDJ symbolically completes a golden cross, which is an opportunity to sell. At this time, waiting for a significant rebound usually leads to deeper and deeper entanglement.

A shrewd trader is the one who makes money by taking advantage of the market's inertia.

Becoming an excellent professional trader is very simple; all you need to do is to establish the correct principles for survival in the market and persist in using them appropriately.

My focus is only on all factors related to the trend. After correctly grasping the trend, the odds of the entire trading system have been greatly improved.

Do not try to predict how the shape of the white clouds will differ tomorrow from today; you just need to take an umbrella when you see the dark clouds. The language of the financial market is to follow when the trend truly breaks through!

Losers, both in quantity and capital, far exceed winners, which becomes a prerequisite for the normal operation of the stock and futures markets. Therefore, there is a popular saying on Wall Street in the United States: The market will use all means to prove that most people are wrong.

Technical analysis is merely to determine whether the trend can continue and whether it will change!

I rarely get hurt because my biggest principle is to avoid risks rather than how much money to make.In the downtrend, seeking support is a thankless task, as the speed of the decline is three times faster than the speed of the rise, because fear is more terrifying than optimism.

My confidence comes from my failures, and the purpose of strategy is to allow us to control risks, rather than to obtain the maximum profit.

Financial investment is a serious job, do not pursue excessive profits, because excessive profits are unstable. What we pursue is stable trading. The essence of trading is not to consider how to make money, but to effectively control risks. If risk management is well done, profits will naturally come. Trading is not about getting rich through hard work, but about getting rich through risk management!

Outstanding figures such as Newton, Einstein, and Roosevelt have all suffered setbacks in securities investment. Newton said after the event, "I can calculate the orbits of celestial bodies, but I cannot calculate the madness of human nature."

The concept of "strategy is more important than prediction" is very, very important. Strategy can save your life when your predictions are inaccurate.

You need to have a good attitude, believe in your own philosophy and model (of course, it has been proven to be correct), and not change it arbitrarily just because you lose money temporarily. We will eventually crawl towards Rome slowly.

If the trend does not change, hold on; if the trend changes, act. When a downtrend has not changed, hold on to your cash; when an uptrend has not changed, hold on to your stocks.

The so-called "trend" is born from the convergence of various factors. When the factors come together, the trend is born; when the factors disperse, the trend dies, that's all (factors: various factors, big and small, that promote and generate trends). When a trend comes, respond to it and follow it; when this trend goes and another trend comes, respond to it and follow it again; when there is no trend, observe and wait.

The two basic principles for survival in the speculative market are: trading with the trend and strict stop-loss.

The development of things requires a process, just like the turning of a ship. The larger the ship, the slower and more difficult the turning process is. Once a trend shows a sign, it will continue, and even if it turns again, it will take a certain amount of time to complete. This is inertia - the essence of the trend! Within a large range, the trend has a very strong inertia, or continuity. When the medium and long-term moving averages begin to turn, the inertia of the huge system will continue this trend. This is the certainty in the market, and smart traders use the market's inertia to make money!The true sharp tool is one's own insights and thoughts, trading in line with the trend—a technique that is never eliminated by the market.

I have the means to quickly terminate mistakes and the methods to extend correctness as much as possible.

Have you heard of the pitfalls of technical analysis? Most people focus too much on the study of details, thus overlooking the traces of the big picture. Predictions of daily movements cannot achieve at least a certain degree of accuracy, but long-term trends can be judged. The longer the time, the more certain the trend, the secret is simple, but most people find it extremely difficult to do. It's not that they don't know, but because of the weaknesses of human nature.

Do you mean that if the trend is upward, it is invincible? Yes, doing stocks is about being appropriate, not precise.

Sober-minded people are good at judging the situation, and they understand that the real bravery lies in being good at avoiding danger rather than conquering danger.

The best time to get involved is when the trend goes smoothly. When the trend is smooth, the trend is clear, and the development of the trend has become inevitable (the rise has become inevitable), this is the best time to get involved! The generals who always win are not necessarily brave and good at fighting, but they are good at choosing the situation, and it is only when it is certain to win that they attack!