The path of trading offers no permanent solution; a successful transaction or past successes do not guarantee that there will be no failures in the future. It demands that investors continuously learn, constantly surpass themselves, and always maintain a firm will and focused spirit.

The best traders are not afraid. They are not afraid because they enter and exit trades based on the opportunities provided by the market.

At the same time, the best traders have developed a non-hasty attitude. To some extent, everyone is afraid.

I hope you can remember that your desire to become a successful trader is a projection of your future self.

Growth means expanding your horizons, learning, and creating new ways to express yourself. Stock speculation is to be expected, but profits require traders to step out of their fantasies.

In the current A-share market, should investors buy more as the market falls or sell more as it falls?

Recently, as the stock market has continued to decline, many index fund investment-related forums and communication groups have frequently appeared with suggestions to increase positions, with the basic reason being: stock indices will not perish, and the index will eventually rise, and a sharp decline is a great opportunity to increase positions.

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This reason sounds quite reasonable, but it does not have much practical operational value.

Today we want to share something different with you.Contrary to mainstream advice, we have not increased our positions recently, and have even reduced them.

During the process of a decline, buying more as the price falls and selling more as the price falls are two different capital management (position management) strategies. They both have a seemingly sophisticated academic name: the capital management strategy of buying more as the price falls is called the martingale strategy, while the strategy of selling more as the price falls is called the anti-martingale strategy.

The martingale strategy is based on this logic: when guessing the heads or tails of a coin toss, bet 1 yuan each time. If you lose, double the bet to 2 yuan for the next round, and continue this operation until you win. In this way, as long as you win once, you can make up for all the previous losses, and then restore the bet to the minimum of 1 yuan after making up for the losses.

It sounds like a wonderful method, seemingly sure to win, because it is impossible to be wrong all the time. On the contrary, as long as you guess right once, you win.

However, the premise of doing this is: you have unlimited capital, and can you guarantee that you will stop playing after winning and never play again?

Assuming the minimum bet is 1 yuan, with a 50% probability of guessing right or wrong, if you double the bet after guessing wrong, the probability of guessing wrong 5 times in a row is 3.13%, and you will lose 63 yuan. The minimum capital required for the next round of betting is 126 times the amount of each bet; the probability of guessing wrong 10 times in a row is 0.0977%, and you will lose 1023 yuan. The next round of betting will become 1023 yuan, and the minimum capital required is 2046 times the amount of each bet. But no one can guarantee that they won't guess wrong for the 11th time. If you continue to gamble, it will gradually become an astronomical figure.

If you don't have unlimited capital, there is always the possibility of bankruptcy. Although it is a low-probability event, if you walk the night road for a long time, you will inevitably encounter ghosts. Low-probability events will eventually happen after being repeated many times.

Moreover, even if you win, you only make a little money, but if you lose, you will go bankrupt.

Buying more as the price falls is actually losing more and betting bigger. If it were in folk gambling, it would be like being blinded by loss, and everyone knows this is not advisable.Therefore, the equivalent martingale strategy of "the lower the better to buy" is the beginning of a disaster for investors.

In the bear market, no one knows where this time will fall, and no one knows how long this time will fall. If we add positions as the price falls, the risk exposure of our assets will also increase. Perhaps the price will rebound in time, allowing us to make a big profit, but what if it doesn't rebound at all?

In the current market, is 2440 definitely the bottom? Last year, when the Shanghai Composite Index was at 3500 in the first quarter, I remember the mainstream view of the market was that 3000 was the bottom. When the Shanghai Composite Index was at 3000 in the second quarter, everyone thought 2638 was the iron bottom.

The bottom of the market is unpredictable. Even if there is an 80% probability that the Shanghai Composite Index at 2440 is the bottom, as long as the remaining 20% probability occurs, it is enough to make many investors who add positions as the price falls go to their doom.

We are not pessimists, and we are also full of confidence in the future of China's economy. A-shares will eventually enter a bull market and will eventually bring us substantial returns. However, we cannot predict how long it will take for A-shares to enter a bull market, perhaps tomorrow, perhaps next year. We also cannot predict how much the A-shares will fall before they enter a bull market, perhaps to the point where many investors give up on investing due to psychological collapse.

If we do not control the risk of our assets' drawdown, and do not protect our principal from suffering significant losses, we are not confident that we can endure the day when A-shares enter a bull market. We also cannot be sure that when the day of A-shares entering a bull market comes, how much assets we still have to enjoy the bull market. It is important to know that after a 50% loss, you need to earn 100% to break even.

We believe that in both rising and falling markets, we should always control the risk exposure level of our assets within our own bearable range, that is, control the drawdown ratio of our assets within the preset range. Only in this way can we ensure that our assets do not suffer significant setbacks and allow us to remain calm and composed in the falling market.

"Trend trading" does not need logical driving?

We have a bias against trend traders, thinking that they only chase rising prices and kill falling prices, and are the main force of the leek army, but in fact, this is not the case.True trend traders do engage in short-term trading, but they are far from "frequent traders." Their approach is highly logical because every move must strictly meet marginal conditions and must be "contrarian to emotions" at all times.

Jesse Livermore's "Reminiscences of a Stock Operator" is known as the progenitor of "buying high and selling low." Here, we share Livermore's most classic battle.

After his third bankruptcy, Livermore's house was repossessed, and he had no money in his account. Even none of his previous lovers were willing to help him out.

At that time, only one brokerage firm on Wall Street was willing to "lend" him 500 shares.

Among thousands of stocks, Livermore was interested in one called Bethlehem Steel, which was then priced at $50 and was slowly rising with the market.

Since it was "borrowed" stock, this trade could only make a profit and not a loss, meaning Livermore had only one chance to make a move.

Win or lose in one go, what would you do if you were in his shoes?

Most people would think, since the market is doing well, just buy it first, make a little profit, and look for opportunities later.

—But this is precisely the mindset of an emotional trader.

Livermore's approach was to "wait."The stock price rose from 50 to 60, but no action was taken; then it rose from 60 to 70, still no action; later, the stock price went from 70 to 80, and then to 90, yet he still did not take any action.

What on earth was Livermore waiting for?

He was waiting for an opportunity, the "best opportunity," an opportunity that would yield the most profit as soon as he made a move.

Livermore previously believed that after a stock had risen for a period, it would experience an "accelerated trend" at the round numbers of 100, 200, and 300 due to the increase in attention.

The stock market is like a pool with a faucet at both the top and bottom. The top faucet is inflow, and the bottom faucet is outflow. If 1 million inflow minus 500,000 outflow is a positive number, that is net inflow. If 500,000 inflow minus 1 million outflow, that is net outflow.

It is easy to explain for a pool, but the calculation method for individual stock data is different. For example, stock A opens at 20 yuan. The seller posts a limit order at 22 yuan for 100,000 shares, and if this transaction is completed, it is inflow. The buyer posts a limit order at 22 yuan for 100,000 shares, and this transaction is outflow. Further explanation is as follows:

First, the buyer sees someone posting a limit sell order at 22 yuan for 100,000 shares and actively buys it, then this transaction is inflow. The buyer's active purchase is inflow.

Second, the seller sees someone buying at a high price (limit up) at 22 yuan for 100,000 shares, and sells the stocks in hand, and the buyer enters the market, which is outflow. The seller's active sale is outflow.

First, a large amount of outflow at a high price

The main force hands over to other accounts to make a profit or zero cost, repeatedly selling. In this way, it appears as net outflow in the data, and can also be regarded as a super high turnover rate. This creates hot stocks, which are on the software's hot list, no matter the turnover rate, capital transactions, large transactions, and other data can be popular. It attracts more retail investors to watch, although they watch but see a huge outflow of funds, they dare not follow up in the short term, and the main force can continue to raise the stock price. Turn around and do net inflow, distribute chips at one time.II. Repeatedly Consuming the Follow-the-Crowd Orders

Net capital outflow is also possible, as large-scale purchase orders may also be the main force, or the main forces may be fighting each other. Anyway, the internal market chips are repeatedly distributed and consumed by the follow-the-crowd orders, which also leads to a huge capital outflow. This is because the main force is also passing the hand, instead of canceling the order, and now no one cancels the order, which affects the trading volume and turnover rate.

III. Frightening the Insiders (Gathering to Fight the Dog)

In order to collect chips, the main force adopts the method of low-level oscillation, low-level control of the market, which is certainly better. But the reality is that many old owners or those who have lost a lot are lying down on the spot, no matter how you sway, they are patient and motionless. At this time, the price is pulled up to the daily limit, large-scale transactions are made, and capital outflow is created, and even repeatedly pulled down and then pulled up to the daily limit. At this time, those who have chips will form a concept that the stock price must fall back. Hurry up and sell, or want to do T. Anyway, the retail investor is deceived. Once you sell, you can never buy it back.

IV. Making a Large Net Inflow, High Position Distribution of Chips

The same technique, hang a large amount of sales at the daily limit position, and then buy in large amounts, and keep repeating, which makes this stock's main force too powerful, no matter what price, it is always eating in, and the inflow of funds is too large, and even on the dragon and tiger list. Retail investors see this and follow, strong stocks in case of three daily limits is 30%, 100,000 yuan earns 30,000 yuan in three days. Dreaming is also smiling, as long as you buy, it starts to fall.

The daily limit is the result of the operation of the main force's capital, and the main force's capital cares for and intervenes in a large scale, which will trigger the stock to reach the daily limit, and the daily limit can also see the intention of the main force's capital:

Firstly, to show its own strength and attract the attention of retail investors.

Secondly, to strengthen the absorption of chips or to raise the construction, strong oscillation to absorb goods.

Thirdly, to wash the chips (absorption methods include: 1. First pull up to the daily limit, and then continue to suppress and absorb. 2. While pulling up to the daily limit, absorb at the same time. 3. Change the trading volume on the daily limit to wash the chips. 4. Continuously pull up to the daily limit and then reverse the continuous daily limit to wash the chips.)Here is the translation of the provided text into English:

Fourthly, quickly exit the cost area.

Fifthly, lure in buyers to sell out at the limit-up price.

This session's sharing of valuable insights comes to an end here, thank you for your support! Selecting stocks in the market is like gambling on uncut jade, see you next time!