Recently, there have been quite a few inquiries about how to observe sector rotation.
In fact, capturing sector rotation is extremely challenging.
This is because sector rotation is the main force's livelihood; if retail investors all understand it, they would be out of business.
Sector rotation itself is actually the result of the main force's capital switching and speculation among various sectors.
After some sectors have been pumped up and high-sold, they switch back to sectors that haven't risen to speculate.
On one side are the sectors where retail investors chase high and buy, and on the other side are the sectors where they can't hold on and sell, giving rise to rotation.
To put it bluntly, the rotation of industries is to harvest retail investors in the process of high selling and low buying.
This is also the reason why retail investors can't make money from rotation and are more likely to lose money.
All sectors, only the main line can be chased, and rotation all needs to be stationed, otherwise it will be lost quickly.
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Therefore, if the way retail investors do rotation is wrong, rotation has also become a poison.The rotation itself requires a stakeout.
This is also the only feasible way for retail investors to engage in rotation.
Today, let's talk about the points to note and the main methods for ordinary retail investors to stake out industry rotation.
Staking out rotation, to put it bluntly, is foolishly lying in wait in advance, waiting for the rotation to appear, and then selling high.
It seems simple, but in fact, it is a kind of torment.
Staking out means not knowing when the rotation will start, or even if it will start.
Therefore, the grasp of the rotation itself must be relatively sufficient.
In terms of the overall pattern, the market rotation can be divided into three forms.
The first type is large-cap stocks and small-cap stocks.The rotation between large-cap and small-cap stocks is the most common phenomenon.
When the market is active, it is often the large-cap stocks that set the stage, with small-cap stocks taking turns and a hundred flowers blooming together.
But when small-cap stocks cannot move, the market depends on the performance of large-cap stocks.
The 80-20 phenomenon has long existed, but the rotation of the 80-20 itself represents the preference of capital.
The 80-20 is not only about blue-chip and thematic stocks, but also about the rotation of offense and defense.
The second type is thematic stocks and blue-chip stocks.
Thematic stocks and blue-chip stocks also represent two camps.
Thematic stocks represent the camp of market hotspots, performance is not important, as long as there is an expectation and a story to tell.
Blue-chip stocks, on the other hand, are the doers, performance is king, and they are steady and unpretentious.
These two major directions represent completely different types of capital, so there is often a seesaw effect in rotation.The rotation and switching between thematic stocks and blue-chip stocks depend on the change of capital styles.
The third type is offensive and defensive.
There are some sectors that are defensive, such as medicine, liquor, food, traditional Chinese medicine, electricity, coal, banking, and so on.
There are some sectors that are offensive, such as electronics, computers, technology, software, AI, chips, big data, and so on.
In a bear market, capital prefers defensive sectors.
In a bull market, it is easier to turn to offensive sectors.
The overall environment determines the rotation and switching of sectors.
For example, under the background of the sharp decline in January this year, the overall trend of defensive sectors was relatively strong, while the offensive sectors were obviously weak.
This kind of rotation is particularly common in bull and bear markets, especially during the adjustment phase, where the switching frequency is very high.
There is another type of rotation, which is actually the rotation between industry tracks.The rotation mentioned here is based on the major types mentioned above, ultimately culminating in the rotation within industry sectors.
For example, the technology sector, the pharmaceutical sector, new energy, semiconductors, real estate, banking, and so on.
This method of switching based on large industry sectors is the most primitive definition of industry rotation.
There are several nuances to this type of rotation squatting.
1. The configuration method of high-low switching.
The method of rotation is high-low switching.
Switch from those that have risen high to those that are still at a low position.
Switch from high valuation to low valuation.
Switch from high capital heat to low capital heat.
The switching from high to low is the essence of rotation, and after the positive rotation, there is also a reverse rotation.Low positions will also switch to high positions, provided that the high positions need to go through certain adjustments.
High and low are relative, and the switch is only due to the adjustment cycle, which is the essence of the capital's high and low switch configuration.
2. Rotation at the same scale level.
Rotation is divided into levels, so when making a switch in rotation, it is necessary to see the level clearly.
For example, in the sub-segment hot tracks, the scale of capital is only tens of billions, and in such tracks where hot money is focused, the rotation is also at the same scale.
Some large plate tracks, with a daily turnover of hundreds of billions, the rotation is also at the level of hundreds of billions.
Large capital only rotates in large tracks, because it is easy to enter small tracks, but not easy to come out.
Similarly, small capital does not dare to rotate in large tracks, for fear of being submerged in large tracks, without any control.
Different levels of rotation correspond to different levels of capital and tracks, in different pools, capital does different things.
3. Grasping the rhythm of rapid rotation.The rotation can be fast or slow, and it is rhythmic.
Generally speaking, the rotation of large sectors is relatively slow.
The so-called large sectors are those with a market value of trillions, or even tens of trillions.
This kind of industry rotation takes at least 1-2 weeks to switch over, and the speed and efficiency of capital adjustment are limited.
As for the rotation of small sectors, it may be able to switch over in just 1-2 days.
Some of them can't even be called sectors, but can only be called hot spots, with only a few dozen stocks within the sector, and the market value is less than a trillion.
Therefore, the control of the rhythm depends on the direction of the squat point, which is very important.
Never rely on guessing to do the rotation, it is very laborious, and it is important to see the approximate rotation cycle.
4. The way and method of position allocation.
Doing industry rotation is basically to allocate the position evenly to each major industry index.However, if there is a clear main industry, the position should account for at least more than 40%.
If it is a branch rotation, it is best not to exceed 20% for one industry.
Of course, some investors may not have much capital, and it is reasonable to divide it into 40%, 30%, and 30% for rotation.
If you find that all the sectors you hold are falling and there is no rotation, it indicates that there is a problem with the allocation, which needs to be corrected.
For example, if all defensive sectors are allocated, they may remain unchanged when the index rises.
Follow the three major sector principles mentioned above, and it is necessary to allocate a part for both offensive and defensive purposes.
Look for the direction of various mainstream industries, wait, and exit after a certain increase, then switch to a lower position.
Doing industry rotation in a down-to-earth manner can at least ensure that you can make money from rotation when the market has a trend.
However, because the industry positions are relatively dispersed, the overall return rate will not be particularly high, but it is relatively stable, which is a good method.
Compared with the method of chasing rises and killing falls, this "waiting for the rabbit" approach is more suitable.
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