In the stock market, no trading method is perfect. Each method has advantages and disadvantages, and there are checks and balances between advantages and disadvantages.
Experienced people can work out a set of stock selection trading methods by themselves. The common method is to summarize the stage trends of a large number of individual stocks, find some rules from them, and then impose various conditions to narrow the range of choices, and take the essence of the transaction.
Can this method of stock selection and trading have a success rate of over 80%? It is feasible in theory, but often not feasible in practice! Everything in the natural world has an internal balance, and the balance can only be maintained when the strengths and weaknesses are evenly matched, and only a very small number of people can take the lead. If a considerable number of people master the method of breaking the natural balance, the original balance will become invalid and iterative updates will occur.
Iterative updates are rarely broken from the inside, and the inside can only be infinitely close to the ceiling state. In the stock market, if there is a special way to make money, its birth is based on two circumstances: one is that as a very small number of people inside the market, it is infinitely close to the ceiling and gains. The other is the development of the times and the advancement of science and technology. New elements are added to break the balance, and there are updates and iterations that generate new profiteering trading methods.
For example, the development of science and technology gave birth to high-frequency trading, and algorithmic trading is a typical one. Algorithmic trading is to use the advantages of computer software to scan the selling and buying prices of individual stocks at a high frequency. If there is a large price difference between the selling and buying prices of a stock, it is considered profitable, and the high-frequency program will use its own millisecond speed. The advantage takes away some chips that are thrown at a price lower than the bid price, and then sells the received chips to a buy order at the bid price. The daily completion of tens of thousands of transactions can generate considerable profits. The success rate of this method was over 90% before it was widely used by institutions in the early stage.
When any trading method has great advantages in a certain aspect, there are often corresponding disadvantages to maintain balance. And this is not one advantage versus one disadvantage, but one advantage versus two disadvantages. These two disadvantages often have the same disadvantages, and one of them can not solve the fundamental problem. When you find that a certain method has great advantages without seeing the disadvantages, it is because your research and practice are not deep enough.
Take the daily limit of buying on the board as an example. If the daily limit is closed, the market will be closed and the next day will have a high probability of opening or rushing higher. This gives buyers who bought the board on the previous day a quick profit opportunity. The biggest advantage of this method is that the closed board varieties have a high winning rate and profitable opportunities the next day.
Recognize high certainty
High certainty is the ultimate goal that traders pursue for a trading method. The daily limit closing is the certainty that good-quality varieties have a higher chance of opening or rushing higher the next day, which is a great advantage. However, the market also poses two problems for these special stocks.
First, the quality of the daily limit is good, and it is difficult to buy stocks that steadily close the daily limit; second, the intraday fried board of the daily limit stocks cannot be closed and loses on the day the board is closed.
After buying and closing, there is also a holding time within the day. During the holding period, the daily limit of the stocks purchased may be broken, and the stock price cannot be sealed back. Such stocks account for 30%-40%. If you can’t seal the book, you will have a book loss on the day of closing. The next day, the probability will be low and the loss will be further enlarged. Therefore, there is no single method that can have a great certain advantage and at the same time can be easily operated.
Adjusting strategy can not avoid the existence of disadvantages
Can the adjustment strategy enjoy the greatest advantages and avoid the most serious disadvantages? can not!
We have designed another set of “buy at the end, the next day” stock picking trading plan for the daily limit stock picking, but it doesn’t work in practice. Avoiding the risk of a stock market explosion during the period from buying and holding shares in the market to the close of the market. In theory, reducing the time of holding shares in the market can reduce this risk. So, is it okay to buy daily limit stocks in late trading? The answer is that it doesn’t work. First, the number of stocks with daily limit raised in late trading is small, and there are fewer operational targets; second, even if stocks with daily limit raised in late trading are closed tightly, the probability of hitting the next day is significantly reduced, which reduces the next day. Make money with high certainty and profit margin.
When strategies are adjusted to avoid one of the risks, new problems will immediately appear on the other end to prevent you from succeeding. This is the internal checks and balances of nature. In fact, every method is the same, and the research reaches a certain depth and you can deeply understand it.