17 Years of Stock Trading: Top Capital's Strategies

• Article
• 2024-09-11
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Here is the translation of the provided text into English: "Exorbitant profits are what I desire, but the lover of exorbitant profits is exorbitant losses, so one must exercise restraint.

Not seeking exorbitant profits, but possessing a smooth upward capital curve allows one to frequently enjoy compound interest.

In investing, absolute profit is the ultimate goal, but the process is also crucial.

A capital curve with too much fluctuation indicates that the capital will bear significant risks in the future, and it is not easy to get on the fast track of compound interest.

If you want to live decently and become a stock market veteran, please first listen to the advice of the old-timers: adhere to an upright faith, possess outstanding and stable skills, and make persistent efforts.

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The common point is that they have gone through countless hardships and become refined through repeated practice: they all share a common characteristic, which is that they have been focused on professional training for decades, continuously learning and practicing, and have achieved repeatable success.

Few people will pay attention for such a long time to become outstanding.

Effort alone is far from enough; withstanding heavy pressure is the secret to success, which is why there are so few veterans.

Buffett prefers to choose managers over 40 years old, which is also an explanation for why most of the veterans we interact with have more than ten years of experience.

They mostly believe that excellence is perhaps an accidental result in the pursuit of professional investment.

Whether you can achieve your dreams is not about how smart or capable you are, but about whether you can get through the difficulties with a smile.

This is the consensus of the winners, and it has nothing to do with whether you admit it or not.

Some people have summarized why most stock investors are destined to be defeated, which is quite insightful: those who follow trends often die in fluctuations; those who do consolidation often die in trends; those who do short-term trading often die in sudden surges; those without methods often die in chaos; those with methods often die in execution; those who rely on subjectivity often die in feelings; those who rely on news often die in the news.

In this light, there are many ways to die, and surviving is a miracle!

Those who have gone through these calamities and have not been defeated are the invincible ones, the true kings who are very rare.

Trading acumen is not isolated but is closely related to a person's other wisdom and abilities, and it is structural.

We believe that a successful trader should have a high 'trading acumen,' which means having the ability to understand and perceive the speculative market and the ability to respond quickly to market changes.

The 'market sense' we often talk about is basically a part of 'trading acumen.'

Market sense is just the level of market analysis, and trading acumen also includes the execution level.

Some traits of excellent traders can be strengthened through training, but they cannot be formed after adulthood.

This is because some of these traits come from the innate structure of the brain, and the other part comes from the basic habits formed when one was still ignorant.

Immortals are made by mortals, but mortals' hearts are not firm.

Having the basic conditions, you only have the conditions for success.

Qian Zhongshu said that to achieve great deeds, the most intelligent person must do the most stupid work.

No one can cultivate for you or act for you; you must have the determination and confidence that 'if you don't reach the Western Paradise, you will never take a step back to the east, preferring to die in the west rather than live in the east' to possibly fulfill your long-cherished wish.

To achieve all this, 'focus' is a necessary requirement.

To do anything, you must first focus deeply on a point, and then you can learn from one thing to understand others.

To be focused, you must be free from distractions, listen more, and think more, while also being able to live a simple life and be indifferent to fame and fortune.

These are not easy to achieve.

Focus is the key to successful stock investment.

Investors focus on a certain effective strategy, and only by truly understanding and repeatedly applying it in practice can they truly master this strategy and thus obtain satisfactory returns.

If you often switch between several strategies, the reason is often that you only understand the basics of any strategy.

If you stay in this state for a long time, the loud slap in the face of the market will wake you up.

1.

Short-term fluctuations are unpredictable.

Can short-term fluctuations be predicted?

Personally, I do not deny that there are investors with high accuracy in short-term predictions.

However, it is absolutely impossible to predict accurately all the time.

Why?

The factors affecting the rise and fall of the stock market are uncertain, such as international situations, economic cycles, fiscal policies, monetary policies, macroeconomics, military, and investor sentiment.

Can these comprehensive factors be predicted in the short term?

They cannot.

Especially the uncertainty of investor sentiment, no one can predict correctly with precision.

Therefore, for short-term trading, no one can predict with 100% accuracy.

Even if the prediction is extremely accurate, it is only once or twice, and it is impossible to be precise every time, which is an impossible thing to happen.

2.

Only having a buying point and no selling point is a failed investment.

What is similar about the situations of many investors in the stock market?

The most obvious similarity is: knowing how to buy but not knowing how to sell.

This should be a 'common disease' of ordinary investors.

After following a listed company's stock for a period of time and investing, later on, whether the stock rises or falls, there is no concept of time or space, and they do not know where to sell the stock.

Several situations usually occur: 1.

The stock price rises, and they do not know to sell, and it keeps rising until it finally falls back to the initial price, and then they choose to sell; 2.

The stock price falls, and there is no stop-loss point, and it keeps falling until it is deeply 'trapped,' and finally, at some time in the future, they can't stand it anymore and choose to 'cut their losses.'

In this case, an investment with only a buying point and no selling point is a failed investment.

There is a saying in the stock market that 'strategy is greater than trend,' which means that with the execution of strategy, there are buying and selling points, and it is possible to better profit from the stock market and avoid risks.

3.

Having both buying and selling points, but not knowing how to be in cash, the risk remains high.

Whether it is the U.S. stock market, Hong Kong stock market, or the A-share market, not knowing how to be in cash makes it difficult to truly achieve profits.

Although the U.S. stock market shows a 'ten-year bull market,' the Dow Jones Industrial Average only samples a few dozen of the most high-quality listed companies in the U.S. stock market and cannot represent all U.S. stocks.

Moreover, when a bear market comes, the U.S. stock market also shows a 'rapid decline.'

We mentioned in the first point that short-term trading is unpredictable.

Since it is unpredictable, always being active in this market, even with a strategy that has both buying and selling points, it is difficult to achieve great returns.

The correct approach is to follow the trend, be in cash when it is time to be in cash, especially during times of trend risk and financial crisis risk.

4.

Being in cash is not about losing opportunities, but waiting for opportunities.

Investors enter the stock market with the same goal, which is to 'make a profit.'

Without methods, it is like 'fighting with bare hands,' which is a great disadvantage.

Therefore, one must learn to plan strategies and execute strategies.

What about being in cash?

It seems like doing nothing, but in fact, during financial crises and market turbulence, not moving and being in cash is a victory.

In summary: I strongly agree that 'being in cash is a state of mind, and stock market investors who do not know how to be in cash cannot become top traders.'

Of course, even professional investors who do not know how to be in cash cannot become top traders.

Only by going with the flow can one achieve great things.

For stocks, I actually prefer investors to concentrate their investments because for most retail investors, professional technical skills are not solid, and experience is insufficient, which leads to the result that the more stocks you choose, the greater the risk of stepping on a mine!

Therefore, investing in stocks is not about winning or losing based on the number of stocks, 90% of stocks will fall in a bear market, and 90% of stocks will rise in a bull market!

It is most appropriate to concentrate on 1-3 stocks, which not only allows you to focus your energy on analysis and research but also makes the allocation of funds more reasonable!

The number of 5-10 stocks will not only greatly waste your energy and time but also, once it falls, you will not know which one needs to be supplemented and which one needs to stop loss.

So my suggestion is to spend energy on selecting and researching the best investment in 1-3 stocks, and the distribution of investment fields is to keep the strategy of not putting all eggs in one basket.

Just like, if the stock market is not working, you still have the income from real estate and the interest from financial management, which can reduce the amplitude of your capital drawdown and also serve as a backup force for your bottom-fishing!

◆ There is a truth in the stock market: no stock can rise directly to the sky.

The driving force behind the stock price is capital, and the most important principle of stock operation is to go with the flow.

Short-term trading has its own momentum, and long-term trading has its own momentum.

When the long-term view conflicts with the short-term view, how to grasp your cycle of long and short positions, and how to effectively use and control capital may be your important subject.

Others' opinions can be referred to, but traders must have their own opinions, their own basis, and enter and exit in an orderly manner.

Only by following the method rather than the person, and following the method to enter and exit, can one possibly succeed.

◆ Investing is not a small matter because the difficulty of investing is quite high, and solid preparation is required.

Think before getting on the bus!

Ask yourself why you want to take this bus?

How much money are you prepared to spend on this bus?

Is it worth it?

If there is no sufficient plan, it is better to stay still than to move.

Whether it is a stock released by the manipulators, a stock introduced by a good friend, or a stock you chose yourself, as long as you adhere to 'the trend is in the stock, the trend increases the stock increases, the trend decreases the stock decreases, the trend goes the stock goes,' you will not be fooled.

The so-called 'trend' can be an upward channel, a moving average system, or a certain indicator, because your trading cannot be based on feelings without substantial basis, right?

Of course, this refers to most traders, because most traders pursue technical speculation and arbitrage, and those who trade based on fundamental valuation, etc., do not need to get into a corner.

With the 'trend,' what does 'the trend is in' mean?

For example, it means that the stock price is running above the upward channel or the moving average is in a bullish arrangement.

"With "momentum," "momentum is in," what does "momentum is in, stock is in" mean?

For example, it means holding stocks and going long when the stock price is in an upward channel or when the moving averages are in a bullish arrangement.

If you're trading stocks, wouldn't you prefer to trade in an uptrend rather than a downtrend?

Of course, this is under the general condition that retail investors in our A-share market cannot profit from short selling.

So, what does "momentum increases, stock increases" mean?

It's simple: the upward momentum becomes increasingly apparent, the rhythm becomes stronger, and the angle of the upward channel starts off gentle like crawling, then as it progresses, the angle steepens, it starts to walk, and then it runs into the main ascent...

This is the process of increasing momentum.

As the operator sees the initial momentum become more and more apparent, they naturally become bolder, and the stakes they place increase, which is "momentum increases, stock increases."

What about "momentum decreases, stock decreases," and "momentum goes, stock goes"?

For instance, a stock in an upward channel moves from a 45° angle to 60°, then to 75°, and finally enters a vertical lift at 90°, and then transitions back to 75°, 60°.

This is a clear reduction in momentum, and the amount of stock held should naturally decrease with the weakening of momentum.

The term "momentum goes, stock goes" refers to when the uptrend weakens and breaks the upward trend, no longer constituting the most basic condition for holding stocks, that is, "momentum is in, stock is in," so of course it's "momentum goes, stock goes."

With these sixteen characters in mind, decisively enter after the momentum turns bullish, and decisively exit after the momentum turns bearish.

Don't keep talking about adding positions and going long when the market has clearly broken through support levels, and don't keep shorting when the uptrend has been established.

In this way, you can easily achieve the speculative master's realm of cutting losses short and letting profits run.