Recently, some people have been asking me why I don't sell when I'm not making money and why I don't sell when I make little. In fact, being positioned at the bottom, like with Audi, has already yielded over 20% profit, so why not sell? I will respond to this all at once. In the future, if anyone asks again, just show them this article.
First, we need to establish a broad worldview. This worldview is extremely important, namely:
If we want to avoid failure in something we do, we just need to look at how the failures are made.
Specifically in the A-shares, cryptocurrency, futures, and forex markets, what have those who do not make money done?
First, buying delisted varieties means losing everything.
Second, chasing highs and cutting losses at lows. The bull market officially starts the day after cutting losses.
Third, sell when you break even, then resist buying, then at high points, you can't resist and buy back, then lose money and continue waiting, then sell again when you break even.
Generally speaking, it boils down to these three things.
Well, let's design a system to ensure that we don't do these three things, which will greatly increase our chances of making money.
Next is very important; we need to set a prerequisite. The condition is that anyone following this investment strategy is an ordinary person, covering 80%-90% of stock market investors. Those rare stock trading geniuses are not included. What we need to consider is how most ordinary people can make money without losing.
Alright. Design the system.
First, to avoid the first point, we can't buy things that are going to die. Whether or not they will actually die aside, just knowing they might die will make you uneasy, ultimately leading to mistakes.
You also can't buy things that are controlled by others. Because you don't know what that person might do; they could go crazy or lose their mind.
So, for example, when we buy index funds. As long as the exchange doesn't close, the index fund won't die. (Even if it liquidates, you can switch to another one) For example, as long as this coin doesn't get delisted, the opportunity remains as long as it exists.
Continuing. To avoid the second point, we need to ensure that we don't chase highs. This is addressed by other subsystems, so I won't discuss it here. Today, I'm talking about not cutting losses at low levels. This is the fundamental reason for 'not selling unless making money'.
A reminder again, this is a strategy designed for ordinary people.
What is an ordinary person? It's someone who panics when others panic, who is afraid when others are afraid, and who goes crazy when others go crazy. Therefore, when ordinary people buy declining varieties, they will feel anxious every day. Watching their own declines while others rise can lead to emotional loss of control. In the end, they decide to sell off the losses that aren't rising, chasing after what's popular.
However, the likely result of doing this is that what you sell will rise, and what you buy will fall. Because of mean reversion, because of style shifts, and because most people do this, and most people cannot make money.
So, if you have a hard rule of not selling unless you're making money, then you won't be hit by the second.
Of course, apart from the premise that the first variety won't die, there is another premise, which is that what you buy is not expensive.
If you buy in fully at 20,000 points in the CSI Medical index, you might have to wait ten years or even longer to make a profit. If you buy after a 60%-70% drop and then use various strategies to lower your cost, the likelihood of not making money becomes very low. Therefore, the golden seeds we choose are all at the bottom, and being at the bottom greatly reduces the risk. The probability and space for further decline are limited. It's just a matter of how much you earn.
Let me say it again.
Ordinary people only have ordinary abilities and emotions. Ordinary people can't afford to make foolish mistakes, so they can only use strategies to restrain themselves. Today a little here, tomorrow a little there, the principal keeps getting smaller, ultimately leading to complete failure.
Therefore, the most important thing about this strategy for ordinary people is:
First, the variety won't die.
Second, not buying at high prices.
Third, there is still room to lower costs through various means.
In the stock market, some mistakes are 'fatal mistakes'. For example, cutting losses at low levels is one of the fatal mistakes. Cutting losses at low levels means you will never have hope.
Design strategies, execute strategies, and don't let fatal mistakes happen to you.
Not selling unless making money.