A few days ago, an old fan urgently sought me out, saying that after following the trends, he had lost nearly 30% of his principal in half a month. I looked at his trading records; they were all about chasing highs and cutting losses, being led by market sentiment.
I taught him six trading rules I summarized from practical experience, and after strictly following them for two weeks, his account not only stopped losing but also started making profits.
First, do not act rashly before a signal is given. Don't chase after highs in a horizontal market and don't bottom fish in a low market. How many people last year sold off their digital collectibles before the rebound? It’s better to miss out than to go in the wrong direction.
Second, learn to “hold still” in a volatile market. He always said, “after a long horizontal trend, there must be a drop,” and kept cutting losses in the key range. Frequent operations in a volatile market are most to be avoided; most retail investors exhaust their bullets in horizontal trading and have no positions left when the trend arrives. It’s better to watch the changes and wait for signals.
Third, align with emotions but layout in the opposite direction. A bearish daily close is an opportunity, while a big bullish candle should be cautious of a pullback. Last Thursday, when the new energy sector fell sharply, I told him to build positions in batches, and on Monday, he got a rebound profit after three days.
Fourth, understand the nature of the decline before taking action. Don’t bottom fish in a bearish trend; the main force might be offloading. A sharp drop can easily lead to a rebound; those who seized the opportunity during the March crash saw a recovery of over 15% in three days.
Fifth, use the “pyramid principle” for building positions. Divide funds into five parts; for every 5% drop, buy one part, and always keep 20% to handle extreme situations, which dilutes costs and mitigates risks.
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