Article/Lu Xiaohui, columnist of Sina Financial Opinion Leader (WeChat public account kopleader)
For many people, seeing the wrong direction means disaster. Sometimes, when extreme risks come, it is possible to even lose money.
Many times, our investment and financing are based on the judgment of the direction of the investment market in a certain period. This in itself is very worthy of recognition, because although the judgment itself has the possibility of error, the judgment of direction can still improve the success rate of investment compared with no judgment. After looking at the right direction, with the increase of confidence, we will also get better returns.
So here comes the question..., What should I do if I see the wrong direction when judging the market?
For many people, seeing the wrong direction means disaster. Sometimes, when extreme risks come, it is possible to even lose money. You may think that I am talking about the importance of financial planning and product allocation. As the basic principle of wealth management, this should be emphasized repeatedly. However, what I want to discuss further here is: How to live well even if you see the wrong direction in the high-risk trading position.
Position management is the key to whether the wrong direction can survive
First of all, we need to clarify two concepts - left side transaction and right side transaction. This is a very vivid statement, which is defined based on the position on the K line map. Left side trading means buying before falling to the bottom inflection point (or short before reaching the top inflection point); Right side trading is to buy or long after the inflection point is clear. But for most people who know these two terms, few people think about what it means to buy on the left or right when we make investments such as stocks.
We will find that there are two common problems for most people who suffer huge losses:
1、 A large proportion of buyers on the left side were judged out if they did not reach the inflection point;
2、 The right side appears in the opposite direction.
In either case, we can sum up the reasons for investment losses as follows: improper operation against the current trend.
Such improper operation can be analyzed from two aspects: one is the investment target; One is position management.
First, take A-share as an example. Many companies can be very resilient in the short term when the market is strong. In addition, they are in a weaker state than the market average. Even some companies showed a more obvious situation of accelerated decline in the late period of market decline. Such varieties are not suitable for allocation before the decline bottoms out, otherwise the possibility of loss is high. Contrary to the logic, in the later period of the rising market, people often regret abandoning the slow rising varieties.
Second, position management Personally, position control is the key to a good life once you see the wrong direction.
Correct errors in a timely manner and add positions on profit positions
Return to the left side transaction and the right side transaction. If, in practice, trading on the left is an early purchase, the basic assumption is that: if you don't know when you will get up, you may still fall, but it should not be far from the bottom; If you are mistaken, you will lose money after buying the position, which is also within your tolerance. For example, investors think that a stock may have bottomed out when it falls to a certain price, but if it is wrong, they should estimate how much it may fall. At this time, you can multiply the decline by the position to get the total loss you may incur, and see if it will upset you. If you feel uneasy, you should give up the operation or further reduce the position; If you still feel comfortable, buy.
Similarly, for the transaction on the right side, the basic assumption is that the upward trend is coming, and after the purchase, there should be no loss in theory, at least there should be no long-term loss. If there is a long-term loss, it means that the judgment of buying on the right has failed and needs to be corrected in time.
For individual investors, as long as the market is in a downward trend, especially a sharp decline, they should rest decisively. The starting point of investment should begin at least when the downward trend is at the end of the tunnel. At this time, the bottom position multiplied by a large decline is still within the acceptable range. For example, 30% of the position is down 30%, or 25% of the position is down 40%, and the overall decline is less than 10%, which is acceptable for most stock investors.
Then, we must add positions on profitable transactions. Just as ammunition must be allocated to the most efficient troops, the overweight trading on the left side must only add profitable stocks. However, if the overall profits are not made after the overweight, the overweight part needs to be subtracted. For transactions on the right side of the turning market, it is necessary to confirm the establishment of the right side direction, establish the bottom position, and then add positions on the profit position.
(The author of this article introduces: the first FMBA of China Europe International Business School, the founder&CEO of Rongyi Wealth, and the executive member of the Professional Alliance of Chinese Financial Planners. With more than 13 years of experience in finance and wealth management, he has served famous financial institutions such as Citibank, and pioneered the domestic high-end community wealth management chain model.)
