In trading, some believe in buying more as the price drops, while others choose to cut losses. Which one is correct?

The premise of buying more as the price drops is the judgment that this is a pullback in an upward trend, so buying more during the pullback.

If it's a downward trend... that can also be the case.

It involves using various technical means, including fundamentals and technical analysis, to determine that this round of decline is nearing its end.

Such declines usually have a rough target price, for instance, estimating that this decline will be around 2590 points.

If it breaks below that and there are no other changes in fundamentals or technical analysis to justify further decline, then one must cut losses; otherwise, it's self-deception.

Cutting losses is a risk management technique, which proves how much maximum loss I can bear when I realize my judgment was wrong. This is also a discipline for entering and exiting trades; if the price goes up after executing a stop loss, then just buy back.

You cannot conclude that your stop loss was wrong at that moment; one must use the execution of discipline as the standard for performance assessment, rather than looking back.

Of course, there is also an extreme approach, which strictly follows grid trading and bets on declines without cutting losses.

This is another trading system, and I don't think there's anything wrong with this trading method. As long as a method is suitable for the current market environment, it is effective.

So, the two are not contradictory; they are complementary means that belong to your own trading system.

Moreover, these two are not the focus; the key lies in your correct judgment of the trend, which is the most crucial part of investing.

In fact, most retail investors only chase after rising prices, and when a real pullback occurs, they only cut losses instead of buying during the dip.

I understand retail investors very well.

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