cream cat

People who have experienced a complete bull and bear market cycle probably know how much impact a bull market and a bear market can have on one's wealth. So in a market where only spot trading is allowed, almost no one dislikes bull markets and no one likes bear markets. When we calculate the peak of our wealth, where are we calculating? It's the peak of the bull market. And according to normal human nature, the peak of a bull market is usually short-lived and has a small trading volume, which means that only a few people have thrown a small amount of money at the peak of the bull market, and its price actually has nothing to do with 99.99% of the people.

This is destined to be just "paper wealth", although many people who are trapped at the bottom of the mountain will regret that they have "lost". Why is this? Because the transition from bull to bear is due to the price deviating too quickly and too much, resulting in too many profit-taking positions and a subsequent exponential increase in the need to maintain growth, leading to a crash. This is very easy to understand. To make something go from $1 to $2, you need funds to eat up all the sell orders between $1 and $2, and the price will rise to $2. But what about from $2 to $4? You need to eat up all the sell orders between $2 and $4. You will find that this doubling becomes increasingly difficult, and the new money needed to eat orders also becomes increasingly more— the higher the multiple, the more outside capital this product needs to attract, and the faster it needs to do so, otherwise it cannot be sustained. And we know that the number of people reached, the diffusion effect, and the total amount of social capital all have limits.

In other words, no matter how good an investment product is, as long as it involves people, it will inevitably go through bull and bear markets. If it rarely experiences bull and bear markets and only experiences a bull market, then one day it will collapse catastrophically because the necessary adjustments in the middle have been artificially deviated. The more people participate, the more revengeful the deviation that should have occurred but did not. From this perspective, when each bull market goes from slow rise to doubling every few days, it has already reached the stage of paper wealth. Although the price of the investment product may still be skyrocketing, more and more people are participating, and the media's evaluation is getting better (especially this point, there will be no big rise without the massive diffusion and outside reach of the media), but you need to understand that you are only choosing the timing to exit, because your current level of wealth is so high only because many people have not cashed out at this time.

It is difficult for people to control their greed. You may think, "I can control it," but when today is ten million and tomorrow it becomes twenty million, you will inevitably get carried away. You will think, if I hold on for another 2-3 days, I will have hundreds of millions, and I will definitely sell then. My luck can't be that bad, right? Often, the crash happens in an instant, ultimately bringing you back to one million. The reason is simple: the demand for funds and diffusion caused by such a large increase is not at the same level. Many people enter the market only when the bull market transitions from slow rise to rapid rise due to the prosperous situation, and the time they enter is often already in the period of paper wealth. At this time, they may continue to make money for a few more days or even double their profits, but as I said, almost no one can sell at the peak, otherwise the trading volume would not be so small. And when the trading volume starts to increase, it only takes one or two days to cut it in half, and a few more days are enough to cut it to the neck. This loss cannot be offset by a small profit of doubling.

So what should we do? If someone is smart, they will say that we should explore various insider information, learn various candlestick patterns, and listen to various expert teachers giving us instructions, so that we can sell at the peak—let me put it this way, if someone like you doesn't lose money, then something must be wrong with the world. No one can predict the peak of a bull market. I will say it again, even if the transactions at the peak are all made by a genius teacher, it won't account for much money. If there are hundreds of genius teachers in the market (considering the population base, this is already a conservative estimate), then the peak will definitely move forward—because they cannot agree on selling at the same time. As long as there is a difference in speed, they will be brought down in advance, and they won't even reach that point. So they must also be trapped at the bottom, do you understand? We shouldn't pay attention to what others say or show off, let's talk about some basic logic. The only way is to plan the steps to sell from the beginning of the bull market and gradually sell.

You don't need to predict the peak, just sell a little when it rises a little, this is commonly known as "gradient hanging orders" in the industry. If you know this, then relatively speaking, you should also know the strategy for a bear market, which is gradient accumulation. Your profits depend entirely on how long the bear market lasts, the longer the bear market, the longer you have to accumulate. As for how low you want to bring down the cost and when you buy at the bottom, it really doesn't matter—because you can never predict whether you bought at the halfway point or the bottom, what's the point of predicting it? Even if you bought it, it's still luck, and it's meaningless if it can't be replicated. Today you may be lucky, but next time your luck may be worse. Every money earned in a bull market is made by buying at the bottom in a bear market. Those teachers who claim to enter only when the bull market is "established," regardless of how accurate their predictions are, can hardly make money in almost every bull and bear market because the so-called establishment itself is a subjective false proposition. Behind stable profits, there must be replicable and stable strategies; behind stable execution, there must be replicable and stable mechanisms. Once you understand these two sentences, you will understand how to make money in investments.

At this point, if someone asks, "Why have I been holding on to A-shares for more than ten years and still haven't made any profits?" Actually, if you really followed the above strategy for more than ten years, you wouldn't have suffered much loss, unless you overly confidently like to pick stocks that you think can make money. In addition, what we are talking about is the bear market in normal capital markets, not a standalone market.