01
If I ask you, 'How many steps does it take to put an elephant in the fridge?', you would definitely tell me firmly, three steps.
So, if I continue to ask, 'How many steps are needed to complete a stock transaction?'
What is your answer?
Never think this question is boring or stupid; it will help you build a neutral investment trading system.
Their relationship is like 1+1=2 in mathematics, Newtonian mechanics in physics, and efficiency generated by division of labor in economics; simple but fundamental.
They are the foundation for the derivation and development of a discipline, the one from 'Tao produces one, one produces two, two produces three, and three produces all things.'
We must pay attention to this one.
How many steps are needed to complete a stock transaction?
The answer is also three steps: buy, hold, sell.
Whether you are going long or short, this is the most basic trading step. Our investment system and methodology are built around these three steps.
Next, let's look at these three stages.
02
During the buying phase, you need to consider four questions:
What to buy? (Stock selection)
At what price to buy? (Timing)
How much to buy? (Position)
How to buy? (Adding to position methods)
Thinking about these four questions is like being in a relationship.
You must meet the right person at the right time, and then you must use the right method to pursue them and express your love.
If you make a mistake, you may end up single for a long time, or worse, half of your assets.
For the above four questions, it cannot be clearly explained in just one article.
Because it involves various aspects.
For example, data indicators, corporate management, business models, competitive analysis, industry cycles, company valuation, position allocation, and so on, so I can only briefly touch on it here. My upcoming special article will address these issues.
If you want to know more, you can like, bookmark + follow.
You can also leave a message below about the investment knowledge you want to understand.
After digging the hole well, come to fill it.
03
Holding stage. The holding stage is not an isolated existence; it must sequentially execute buying strategies or prepare to execute selling strategies.
Sequentially executing buying strategies aims to expand profits.
Preparing to execute a selling strategy is to reap profits or minimize losses.
At this stage, it is essential to have an understanding: holding can be long-term or short-term; long-term holding doesn't mean holding for a lifetime.
You might think that you want a lifelong love, but after getting married, you want to leave within a few days because you discover the other person may have contracted HIV.
You say you have a solution, but how can you leave?
This is the same in business; you buy shares of a company possibly because its performance is stable, risks are controllable, and fundamentals are sound.
But if a policy comes down that changes the entire industry's logic, what is there to play with?
When faced with such irresistible forces for individuals and businesses, one must be decisive; if a bold decision is needed, it must be made.
I have always been an advocate of long-termism; I am very familiar with Buffett's saying that if you don't want to hold for ten years, you shouldn't hold for even a minute. But I know I can't become a bookworm; I am not a selling program dictated by calculations that must wait ten years to sell.
I have my own brain; even if it is sometimes not useful, it has clearly told me when it is useful:
There are no eternal truths in the world, only eternal changes.
04
Finally, selling is based on the two points just mentioned.
Maximizing profits and minimizing losses both emphasize one point: sell at a high price.
Selling has no secrets; it's just about finding a way to sell at a high price.
But aside from the divine, is there anyone who can escape at the peak and sell at the highest point? Before prices drop, no one knows where the highest point is.
Therefore, the most commonly used and practical selling strategy is the take-profit method or the price-earnings ratio method. Some choose to take profit on a pullback, meaning if the Shanghai Composite Index rises by 100% and then falls by 15%, they sell all positions.
The principle is simple: when the stock market rises sharply and there are obvious signs of a downturn, the chance of a bear market turning into a bull market increases significantly. This is a market signal, telling us to withdraw all invested funds.
Understand these three steps; do not view them in isolation or rigidly. They are fluid and alternating.
These three steps are also what we must think about and plan before buying, just like a company's strategic tactics; we do not fight unprepared battles.
05
Many things must be understood from the beginning; if you don't understand what you are doing, even if you achieve some results, you may end up more confused as time goes on.
So, there is a common saying: thinking is more important than doing, and choosing is more important than effort.
Why are you doing this?
Why choose A? Why not choose B? Once you have clarity on these questions, the following steps will be much more efficient.
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