Looking back at any previous bull market, it has always been this process:
First phase: indices soar, finance, brokerages, blue-chip stocks surge.
Rising to a point that scares you, especially in internet finance and brokerages, after one round of the market, core stocks average a 3-5 times increase.
Second phase: leverage increases, various financing channels open, funds begin to overflow, capacity stocks welcome major increases.
Third phase: weighted stocks take the stage, themes perform.
The highly elastic technology sector will see an explosion.
Fourth phase: eliminate oversold stocks.
Every sector will experience rotation until there are no directions left that haven't risen.
Ordinary people must remember these key points to grasp the bull market.
1. This is the most important: maintain a positive pyramid of holdings and do not use leverage.
The lower the position, the higher the holding. The more it rises, the more you should reduce your holdings and preserve capital, completely withdrawing this portion of funds over one cycle. Many people initially enter with small positions and grow increasingly greedy, adding to their positions at the top, even using leverage.
I say this here; many people will still act this way in this market.
Do not use leverage, which includes avoiding options and futures, and do not borrow money. Do not even use the money you originally planned to spend. Many tragedies stem from leverage; ordinary people should stay away from it.
2. Ordinary people should not make too many trades each cycle; if trading skills are lacking, they tend to look at one mountain while longing for another. The more they trade, the less money they earn.
From my observation, the more ordinary people want to trade and cannot suppress their urge to do so, the more likely they are to be wrong. When they feel reluctant to trade and hesitate, their success rate is actually higher.
(Professional traders are exactly the opposite; when they are in the zone, their decisions are better than when they rush or hesitate.)
3. Diversify your holdings; five positions are enough for hundreds of thousands, and about ten is sufficient for millions.
Retail investors should avoid two types of operations: one is being monotonous, stubbornly sticking to one stock or fund. In hindsight, there are always big winner stocks, but it's hard to predict beforehand. Some stocks can also perform poorly even in a bull market, so it's important to diversify holdings to mitigate risk. The other pitfall is having little money but buying dozens of stocks, making oneself feel like a fund manager, which is not productive.
4. If you lack the ability to chase high prices, look for stocks that are experiencing a rebound.
Most people do not have the ability to chase high prices; chasing usually comes with stop-losses, and they often end up trapped, which requires a mindset that most cannot maintain.
1) The first phase of an upward cycle starts with clearly logical choices, such as the most elastic brokerages and the strongest recovering real estate sectors. Most people cannot catch emotional recoveries; firstly, many do not believe in them, and secondly, turning around emotions usually comes with unexpected timing. Ordinary investors do not watch the market every day, so they miss out.
2) The second phase is generally driven by economic development themes, such as the five major sectors from 2006-2007 or large state-owned enterprises and tech companies in 2014. These trends are easy to understand and are accepted by both ordinary and institutional investors, indicating a good direction for 'joint efforts'.
This time, I personally agree more with technology and independent chip lithography machines and AI. Cars and new energy that have already secured a good position in the industry are also viable, but because too many investors are trapped in these sectors, if they rise, selling pressure will be significant, so I engage in them less.
I am also optimistic about the concept of state-owned enterprise mergers; this is suitable for positioning.
3) Concept + Defense
During this phase, there may not be any clear opportunities, but if there are, it will be filled with rumors and talk of stock gods. At this point, it is purely driven by emotions, with little logic involved.
Some people are just speculating blindly, while others retreat to well-established stocks for defense. At this time, they should clear their positions, but ordinary people often cannot do this. Being able to exit with the principal while leaving some profits is already quite a strong ability.
5. Those who know a bit about trading and can chase high prices.
Perhaps some people want to chase high prices.
● In a bull market, chase the leading stocks, do not fear heights;
● Since you are chasing high prices, be decisive with stop-losses, but in a bull market, there are often sharp declines, so set the stop-loss standard a bit higher;
● Once you have a profit cushion, do not rush to sell.
Actually, there is nothing new; this should be done in any bull market, but unfortunately, most people cannot do it.
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