A good trading model can make your operations twice as effective with half the effort! Today, I will talk to you about how to establish your own trading model. The article is a bit long, but it is all valuable content, so please pay attention and read it thoroughly!
What is a trading model? To put it simply, it is how to operate. There are countless trading models; here I will only discuss three typical methods in the market:
1. Board-Buying
Chasing limit-ups was the most popular short-term trading strategy before the implementation of the registration system, generating various doubling myths. The main feature of this strategy is to enter when the stock is at or near its limit-up; there is no profit on the same day, but if someone takes over the next day, you can successfully close your position.
2. Chasing Highs
Chasing highs is somewhat similar to board-buying; both involve choosing strong moments. Entering during a surge belongs to chasing highs, which is a common strategy among most investors, but a misstep could leave you stuck at the peak. Chasing highs tests your market sense.
3. Low-Buying
Many people misunderstand low-buying, thinking it means entering stocks in a downtrend. In fact, low-buying should be done in accordance with the trend, and the best low-buying opportunities are in the early stages of an uptrend. Currently, low-buying is replacing the board-buying strategy because it offers better cost-performance.
The three strategies mentioned above are typical models in trading. How should investors establish their own model? Trading is ultimately aimed at making profits; as long as you can achieve a relatively high accuracy rate, that is your best model. Therefore, try to focus on what you are best at; if you want to do everything, you may end up failing at everything.
From a risk perspective, low-buying is undoubtedly more suitable for general investors; therefore, let's discuss in detail how to execute low-buying.
First, you must carefully and thoroughly review your trades every day, as your low-buying targets for the next day must come from your review. Some investors like to make arbitrary moves during trading, often leading to chasing highs; everyone likes to buy rising stocks, which is human nature.
Second, after reviewing, develop your trading plan; this step is also crucial because the plan must be implemented. If you prepare your plan in advance and execute it strictly, you have succeeded halfway. Making plans during trading can easily be influenced by the market and individual stock fluctuations; emotion is the devil, and everyone has a deep understanding of this saying.
Third, yesterday's hot stocks may not be today's hot stocks, but they could become the next hot stocks. Low-buying involves looking for pullback opportunities in newly initiated hot stocks at the bottom.
Fourth, do not have a gambler's mentality with low-buying; if you go all in at once, you may encounter significant drawdowns that affect your trading mindset. Therefore, try to choose a staggered approach, and do not always aim to enter at the lowest point, as that is unrealistic.
Fifth, be decisive when entering a stock during a pullback; entering when you are scared is the most important aspect of the low-buying strategy.
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