Why does the stock drop when I buy and rise when I sell?
Why can I still lose money when the bull market starts?
Why did I lose most of my principal before the bull market?
1. The motivation for stockholder washout
（1）Reasons for washout
①: Clear floating chips
Floating chips are divided into two types: unstable chips and profit chips.
Unstable chips are mostly held by many retail investors. The biggest characteristic is that both rises and falls are easy to flow. Once the stockholder starts to rise, the flow of these unstable chips will strongly interfere with the rise, affecting the rising effect; the greater the proportion of flowing unstable chips, the greater the impact.
The stockholder cannot absorb all chips; some chips will always be in the hands of others. These chips may have some profit margin before the stockholder's rise, meaning they obtained chips. If these obtained chips reach a certain proportion, the stockholder may encounter mid-way sell-offs that impact the rising effect, increase the rising cost, or even threaten the stockholder's final distribution.
②: Raising the average holding cost
In order to raise the stock price and initiate a wave of increase without being disrupted, the stockholder must offer certain benefits to other shareholders, allowing them to realize some profits. Even if they hold on patiently, the profits cannot be too high; if they are, the stockholder might 'escape' at any time, ultimately being trapped is the stockholder themselves.
The stockholder will create a false appearance of a weak market, even ruthlessly crashing the stock price, causing floating chip holders to panic and sell their stocks. At the same time, the stockholder will protect at critical technical positions to quickly encourage another group of people optimistic about the market to follow in. By swapping floating chips, the new holders' costs will rise, which will not disrupt the stockholder's rise.
Does it resemble this wave of Bitcoin washout cases?
③: Reduce the cost of self-holding
Washout is actively implemented by the stockholder, who has already designed the stock price's high, low, and trends in advance. When the stock price rises, the stockholder suppresses it, which serves both to wash out and allows them to sell some chips at a high price.
When the stock price falls to the target low, the stockholder will intervene to protect the stock, reclaiming chips sold at high prices, thus gaining certain profits, reducing their holding cost, and the transaction costs they must incur during the rising phase. This adjusts the capital structure, making the rising power more robust.
This opens up space for acquisition and sometimes achieves the goal of reducing positions, making it unclear to observers about the stockholder's cost and difficult to discern where the stockholder will sell in the future.
④: Adjusting the position structure
If the stockholder holds chips of multiple stocks, the positions of several stocks will always differ. The stockholder can wash out a certain stock at a high position and withdraw the funds to invest in other stocks for rising, then wash it out again when it reaches a relatively high position and withdraw the funds again.
At this point, the previous stock washout is almost over, and re-investing funds for a rise fully maximizes the efficiency of fund use and better demonstrates the sector effect.
If the stockholder has collected too many chips during accumulation, it will make the stock less active and tend to be inactive. The stockholder will then use washout to sell some chips at high positions, adjust the position structure, and activate the stock characteristics to facilitate the chasing of trend-followers.
⑤: Stabilizing investor emotions
After the stockholder washes out, they will significantly raise the stock price, making those holding shares and new buyers firmly believe that the stock price will reach new highs, thus strengthening their confidence in holding shares and not easily selling, laying a mass foundation for future distribution.
⑥: Waiting for the opportunity
The stockholder can control the short-term fluctuations of individual stocks but finds it challenging to control their long-term trends. If they move against the trend without any speculative themes, leading to a solitary rise, they will only suffer.
Therefore, when the timing is not ripe, the stockholder builds positions; after completion, they will continue to absorb chips through washout while waiting for the trend or sector cooperation. Only when the timing is ripe can the stockholder obtain the highest returns at the lowest cost.
（2）Purpose of washout
The main purpose of washout is to raise the average holding cost of other investors, preparing for future stock price increases and smooth sell-offs.
The stockholder, having absorbed enough chips, needs to wash out part of the floating chips held by others before raising the stock price, specifically shaking out those who entered at low prices and have small profits to reduce resistance during the rise.
Then, those who think there are profits to be made and can't wait to come in will chase at high prices, ultimately aiding the stockholder in smoothly exiting at a relatively high price.
Washout can further activate stock characteristics, benefiting the stockholder's repeated absorption of chips. During this high selling and low buying process, the stockholder can also gain some price differences to offset the higher costs they will incur in the later rising stage.
（3）Key factors in washout
①: The time of washout
The stockholder's washout will have a certain operational rhythm, which means they need to grasp the timing of each stage.
If the washout time is too short, it cannot effectively clear floating chips and will not achieve the intended purpose.
If the washout time is too long, it may lead to weakened stock characteristics, with no one following up, making it impossible to carry out subsequent rises, let alone smoothly sell off.
②: The space of washout
The space of washout refers to the amplitude of the stock price's fluctuation between the highest and lowest points during the stockholder's washout process.
If the purpose of washout is to clear floating chips and raise the average holding cost, the stockholder will implement a narrow fluctuation.
If the purpose is to clear floating chips, lower the self-holding cost, and wait for the opportunity, the stockholder will implement wide fluctuations.
The washout process is an important sign of whether the stockholder's skills are deep and technical, and it is also a severe test for investors. We should maintain a calm mindset, observe how the stockholder performs, and wait for the right moment to act.
In summary, during the operation process, the stockholder uses various methods for washout, aiming to make small and medium investors enter and exit according to the stockholder's intentions, achieving the goal of successful operations.
In this struggle, the stockholder operates in the dark while small and medium investors are in the light.
Small and medium investors can only fully understand the highs and lows of stocks after thoroughly analyzing the market, thus deciphering the stockholder's intentions.
Washout is a necessary step in the process of stockholding; once the washout is complete, it often signifies the beginning of a new round of rises.
2. Common methods of stockholder washout
Shortly after the opening, the stockholder uses a technique to slightly lower the stock price to test how many floating chips are present in the market.
If the stockholder's suppression does not attract a large number of sell orders, and the stock price only slightly declines with rapidly shrinking volume, it indicates that investors have a stable holding mentality and there are not many floating chips.
If the stockholder's suppression immediately attracts a large number of sell orders, it indicates that investors have an unstable holding mentality and many floating chips, which is not conducive for the stockholder to raise the stock price, prompting the stockholder to wash out.
（1）Pressing and washing out
For those stocks with large increases but mediocre fundamentals, the stockholder will first raise the price and then implement a fierce downward suppression, causing the stock price to plummet, forming a long bearish line, triggering panic in the market. At this point, some will leave as a strategy to secure small profits or even exit without profits. However, the stock price does not stay low for long; the decline will definitely stop within a week, and sometimes it will soar overnight.
（2）Fluctuation washout
The stockholder controls the stock price up and down within a certain range, with an amplitude of over 10%. The stockholder buys low and sells high, forcing trend-following retail investors to sell low after repeatedly increasing their holding costs and reducing floating chips in the market. This method of washout is applicable to various types of stocks.
（3）Pulling and washing simultaneously
If the overall market situation is good, after raising the stock price to a certain extent, the stockholder will stop taking active actions, allowing the stock price to naturally decline or distribute and suppress it.
At this time, the stockholder constantly adjusts the proportion of chips and the amplitude of stock price fluctuations, enticing small retail investors to continuously enter and exit. Pulling while washing integrates the processes of rising and washout together, repeatedly using it to not only drive out those with weak will but also enhance the confidence of those with strong will in holding shares. After the pressure from profit-taking eases, the stockholder will rise again.
（4）Significant drop type
For stocks with large and rapid increases, during general adjustments, stock prices will drop sharply. When fear spreads, the stockholder will take advantage of the situation and absorb a large amount of low-priced chips.
The stock price is repeatedly pressed down each time it rebounds to a previous high, many times. This washout primarily relies on suppression, and stockholders often use this method when they have substantial profits or are speculative.
（5）Horizontal type
Horizontal type washout often occurs in blue-chip stocks, where the stockholder's rise suddenly stops, creating a platform that causes some already profitable investors to exit for safety. Those lacking patience will also exit without profits.
All chips fall into the stockholder's hands, and retail investors will only have options to chase high or grab high.
This sudden stop, if it occurs after rising to a certain target, will result in relatively large fluctuations and a relatively long horizontal time, generally exceeding one month.
If it occurs during a rising process, the fluctuation of the stock price will be relatively small, and the horizontal time will be relatively short, generally not exceeding two weeks.
Generally, the longer the platform remains stable, and the smaller the fluctuation, the more thoroughly the floating chips can be washed out, leading to a stronger momentum for future stock price increases. Horizontal washout uses time to exchange for space, 'the longer the horizontal, the higher the vertical.'
The characteristic is that the stock price remains relatively stable, but the trading volume continues to expand.
（6）Extreme washout
①: Pulling long bearish lines in the initial rising phase
The stockholder will leave obvious signs when intervening, allowing retail investors to 'see' that the stockholder has already begun or will soon start to rise. However, during the initial rise, a long bearish line suddenly appears, causing panic and sweat among short-term traders, who have to sell at a loss. However, the next day the stock price is pulled back into the original rising channel. This type of short washout cycle is effective and poses a great threat to ordinary retail investors.
②: High open, low kill method
This often occurs when the stock price is at a high without volume and strong buying at the low. The stock price opens at the limit up, or when reaching a high point, there is aggressive selling, often almost hitting the limit down, but the stock price does not reach the limit down, or there are substantial buy orders at the limit down. At this point, those lacking confidence will sell at low prices, and the stockholder will buy them all.
③: Limit down selling method
At the opening, hitting the limit down, retail investors see the limit down and are afraid it will drop further the next day, leading them to sell at the limit down price. Meanwhile, the stockholder is closely observing and will buy all when the limit down sell orders reach a certain quantity and no longer increase.
If the absorbed chips are sufficient, the stockholder will start raising the stock price; if not enough, they will repeat the trick the next day. The stockholder's methods and strategies for washout have been repeatedly validated, with a relatively high success rate, making it difficult for ordinary retail investors to identify.
Therefore, the main purpose of the stockholder's washout is to raise the average holding cost for small and medium investors, drive away trend-followers, and reduce the pressure of further increasing stock prices. At the same time, in actual high selling and low buying, the stockholder can also earn some price difference to reduce the higher costs they will pay during the rising phase.
3. Characteristics of stockholder washout
As the controlling force, after raising the stock price to a certain height and slowly leaving the stockholder's accumulation cost stage, the main reason for washing out is that every controlling force can only control part or most of the circulating chips; a certain meaningful amount of circulating shares still remains in the market.
During the washout process, the controlling forces gradually dismantle the advantage of small and medium investors, who can easily change direction, while forming the disadvantage of larger ships that are hard to turn.
Below is a brief introduction to the characteristics of washouts at various stages: stockholders will adopt different washout methods at different stages, and the forms will vary.
（1）Characteristics of washout during rises
①: When the stock price is above the 10-day moving average and far from the 10-day moving average, it means the stockholder is about to start washing out.
②: The 10, 30, and 60-day moving averages maintain a bullish arrangement. Even if the stock price dips below the 10-day moving average, it will hover nearby and not drop too deep, generally not breaking the 30-day moving average. Even if it does break, it will quickly rise back. Horizontal adjustments will end when touching the 10-day moving average, launching a rising trend. Longer adjustments may break the 10-day line but generally will not wait for the 10-day line to touch the 30-day moving average.
③: During the washout, the overall volume generally shrinks first and then slowly expands. In the early washout, timid or impatient investors are mostly washed out, resulting in significant volume. In the middle of the washout, the floating chips are mostly cleared, leading to a natural shrinkage in volume; in the later stage of the washout, the volume expands due to the stockholder's replenishing and raising, causing the price to increase.
（2）Characteristics of the stock at the right level
① Reversal of the descending channel
When the stockholder uses a slight downward movement to wash out, while the overall market is rising, the stock is forming a gentle downward channel, slowly sliding down the price within the channel. One day, a bullish line suddenly appears, reversing the downward trend and gradually stabilizing, indicating that the washout is nearing its end.
② After a shrink in volume, it then expands.
The stockholder allows the stock price to fluctuate repeatedly, only providing a relatively narrow limit area, with trading volume significantly shrinking compared to the previous period. When trading volume suddenly increases again one day, it indicates that the washout is nearing its end, and the stockholder will take action.
③ Retreating, stabilizing, and then rising again
Washout will generally show as a price drop. When the stock price falls to a certain level, it will be significantly supported, with daily closing prices being close to the same level, and the moving average will shift from a continuous decline to a flat line; signs of the moving average rising will appear as the washout nears its end.
（3）Characteristics of washout methods
① High open, low close
At the opening, the price hits the limit up, or after competitive bidding, there is a sharp rise, but soon a significant drop occurs. When it drops deep enough, the stockholder will open wide and eat as many chips as are thrown out until no one sells anymore.
② Low open, low close
After the opening, there is a sharp decline, even hitting the limit down. When retail investors panic and sell, the stockholder will buy as much as they can.
③ Constant price movement
When the overall market situation is good, and most stocks rise with considerable amplitude, the stock undergoing washout appears to be unaffected.
（4）K-line chart characteristics
①: Bearish and bullish lines are interspersed.
②: Cross stars with long upper and lower shadows often appear.
③: The stock price generally stays above the stockholder's holding cost area, short-term above the 10-day moving average, and medium to long-term above the 30-day moving average.
④: Trading volume decreases from large to small, and by the end of the washout, it has drastically 'shrunk.'
⑤: The turnover rate is generally larger than during the accumulation phase and is a steady increase over several days.
⑥: At the end of the washout, there will be one or two days of middle bullish lines, and the KDJ will quickly form a golden cross after experiencing a dead cross.
⑦: The K-line chart initially shows a bearish arrangement, and the patterns generally appear as triangular consolidation, flag consolidation, and rectangular consolidation.
From the above content, we can clearly understand that washout is a systematic killing process.
On the surface, there are small waves, but in reality, there are undercurrents. A moment's carelessness can lead to falling into a quagmire.
On the surface, washout is a process of rising and re-rising.
Essentially, washout is often a psychological tactic used by the stockholder to gradually raise the investment cost of non-main stakeholders, maintaining a significant level of circulating shares in the secondary market.