When we first met, he was really just an ordinary office worker, breaking his monthly salary into pieces to spend. But this person has a characteristic: strong execution, and he never asks, 'Why do it this way?'. The six rules I discussed with her, he has really adhered to one by one for eight years.
Today I am also sharing these insights with you, no beating around the bush, everything comes from the pitfalls I encountered in practice. This is not investment advice, purely my personal understanding of the market.
1. Rapid rise and slow fall are often signals for buyers.
Have you ever encountered a situation where the price suddenly spikes, and you think it's going to take off, but then it slowly falls back, lingering around? Many people panic at this moment, thinking it's 'baiting the bulls'.
But my experience is that if there is a decline with shrinking volume and key support holds, it often means that big funds are quietly taking over. They won’t push the price up all at once but will pull it up while accumulating shares. At this time, don’t get shaken out; holding steady might actually be an opportunity.
2. Weak rebounds after sharp declines, be alert quickly
What’s most feared is not the drop, but the rebound after the drop that feels like it hasn’t eaten—volume doesn’t keep up, and the price trembles. This usually indicates that the main players have already left, and the remaining retail investors are stepping on each other. My friend has avoided major declines several times by following this rule; he says, 'The uglier the escape looks, the less you should look back.'
3. High volume at a peak is not necessarily a top, but be cautious of new highs with shrinking volume
Many people shout that the top is in as soon as they see high volume, but the 'last madness' at the end of a bull market is often accompanied by sustained volume. The real top is when no one is taking over—the price is still inching up, but the volume is decreasing, which is called a 'volume shrinking top.' When I see this signal, I usually start to reduce my positions in batches.
4. The bottom does not form in one day
A one-day explosive rebound is likely a false signal. A true bottom requires multiple tests, with volume gradually increasing, and the price no longer making new lows. I often say, 'One day of enthusiasm cannot support a reversal; we need to see if it can last for three days.'
5. The pattern behind it is human nature
Candlesticks represent price, and volume represents emotion. Increased volume indicates fear or greed, while shrinking volume indicates wait-and-see. Understanding the changes in volume actually means understanding the mindset of most people. My daily review focuses on: which position had unusual volume today? Why are people rushing to buy/sell here?
6. The most difficult realm: no emotions
My friend is successful, not because she understands technology more than others, but because she follows the 'four nos': no luck, no impatience, no greed, no fear. When the market is volatile, others cannot hold on, but she can endure; during false breakouts, others chase prices up and down, but she remains unmoved. When the real trend comes, she dares to take large positions.
In the past eight years, I have seen too many people pursue the 'wealth code,' yet they fail to execute even the most basic rules. That Beijing girl didn't rely on luck; it was her terrifying discipline that made the difference.
The market always rewards those who can endure, not those who think they are clever.
If you can also understand the essence of these six rules, even if you only apply half of them, your trading rhythm will be completely different. Slow is fast, and stability leads to winning.
