Recently, I have been frequently asked why this round of the market started from 2635, with no significant declines along the way, and has been rising all the way.
Have you noticed a phenomenon?
The index experienced ups and downs for 2-3 months from breaking through 3000 points to 2635, and it only took 8 days to return to 3000 from 2635.
Some people say this is a task assigned by the higher-ups.
But the actual situation is that this is a game of chips, a game of human nature.
Taking people by surprise is the key to the game.
When the index was around 2700, everyone was convinced of one thing.
The market is full of chips, and there is no need to rush to buy. Wait a bit, and you can buy stocks at lower prices.
It's like when the index was at 2700, everyone was waiting for 2600, 2500, and no one was in a hurry to buy stocks.
Only those who were trapped were still wailing in a piecemeal manner.This has led to a situation where, at the very beginning of the market, those who were not holding positions were hesitant to get on board.
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And those who had heavy positions started to reduce their holdings just a few days after the market began to rise.
Because no one expected the market to go up smoothly; everyone thought the market would fluctuate, and the market trend would not come.
Some even believed that after a few days of rebound, there would be further declines, and there was still a lot of room to fall.
The reason for this "illusion" is the fear after a long-term decline, which could not be dispelled from the bottom of one's heart.
It is said that any market trend starts with hesitation.
In fact, what hesitates is not the market trend, but people's hearts.
The more hesitant people's hearts are, the faster the market trend develops, because there are only so many chips at the bottom, and it is necessary to seize the time to grab them.
When retail investors realize that chips are more valuable than cash, the index is fluctuating above 3,000 points.
At this time, they will face the next problem.Should we increase our positions or reduce them?
Of course, those who are optimistic about the market will choose to increase their positions, while investors who are bearish will definitely reduce their positions.
However, whether the market is bullish or bearish should be determined objectively, not through subjective analysis.
When the market trend is very strong, do not subjectively be bearish.
Since the market can quickly rise and break through 3000, it means that there will not be many opportunities to get chips below 3000.
But since the market is above 3000 and shows signs of stagnation, it indicates that there are still many difficulties above 3000.
Therefore, the market has given a foolproof strategy: buy low and sell high.
However, this strategy that everyone knows is a great test for the execution of retail investors.
Buying low and selling high and chasing gains and cutting losses are completely opposite investment strategies, which is still a game of human nature.
Retail investors are in the market every day, looking for so-called hot spots, eager to step on the pace of rotation, and earn excess returns.Apart from a small group of retail investors with exceptionally good market sensitivity, most are slow to react and find it difficult to truly keep pace with the rotation.
When a lot of information is widely known, it is the time when risks have accumulated to a certain extent.
It's like when everyone is shouting about technology, the adjustment of technology stocks comes as expected.
The game of human nature lies in the fact that when you finally decide to get on the train, you find that it is no longer a reverse train to pick up people, but a high position on guard.
The essence of this market is not investment and speculation, but who holds the chips.
Everything revolves around the game of chips, and behind this game is the game of human nature.
Junk stocks can be speculated to the sky because the chips are all in the hands of the main force, and no one comes to take the plate, so it continues to rise.
High-quality stocks lie on the ground and do not move because the chips are all in the hands of retail investors, who will carry the sedan chair?
When retail investors look down on banks, coal, and oil, they rise to show you.
When retail investors flock to the pharmaceutical, new energy, and chip sectors, they naturally collapse.High-position chips, as many as you want, low-position chips, sorry, none available.
In the essence of human nature, there is also a principle called "buying on the rise, not on the fall."
Unless you are trapped yourself and choose to add to your position when it falls.
In most cases, it is to add to the position when it rises, and just lie flat when it falls, and it is unlikely to look at the stocks that are falling.
That is because retail investors believe that there is no main force when it falls, and only when it rises can they see the actions of the main force.
You always see what the main force wants you to see, which makes this game inherently unfair, with unequal information.
Therefore, retail investors are almost manipulated in the palm of their hands.
If you want to break this situation, you need to find the weaknesses of human nature and know how to increase the accuracy of judgment.
Many people may be at a loss.But in fact, there is a very simple method, which is to look at history.
It is said that there is nothing new under the sun, and since human nature is unchanging for thousands of years, it must be written in history.
Perhaps, due to the macro fundamentals and the capital market, there will be some differences from the past.
But the market trend is basically the same, and there are traces to follow.
For example, the recent rebound is a corrective market that appeared after the market adjusted for 9 months.
After a long period of decline, there have been a few corrective markets in history.
The corrective market at the beginning of 2019, at the end of 2012, at the beginning of 2012, at the end of 2008, at the end of 2005, and at the end of 2003.
Some corrective markets are the starting point of a bull market, and some are a rebound in the middle of a bear market.
These corrective markets all have one thing in common.
When they rise, they don't look back at all, and there is basically no deep adjustment to let people get on the bus.The reason, when analyzed, is that at the end of the decline, funds have already secured their positions by taking advantage of various bearish factors.
So, in the early stages of the rise, there is no need to secure positions at all; one just needs to keep pushing the prices upwards.
Most of these corrective market trends only last for about three months.
That's because a continuous rise over three months is enough to make the originally bearish retail investors obediently start to go long and get on board at high levels.
When the market is full of slogans that the bull market is coming, the trend naturally comes to an end.
Additionally, one can also estimate the extent of the rebound through space.
The highest rebound can reach 60% of the decline, and the minimum can also reach about 40% of the decline.
Human nature itself is weak, and the market trends reflected by human nature are similar.
When you put aside your subjective judgment and objectively look at the market cycle and the rhythm of the market, you will find many different things.
Do not always listen to the belief that the bull market is coming, nor be misled by some extremely bearish rhetoric.Overcoming human nature and respecting the market's choices is the only way for retail investors to succeed in stock trading.
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