The four stages for beginners to learn how to trade stocks

Are there such levels for learning stocks? The answer is "yes". Here I will talk about the stages of learning stocks based on my own history of learning stocks. We can estimate what stage we are at now. The editor has compiled here the four stages of learning to trade stocks for your reference. I hope you will gain something from the reading process!

1. The reckless stage

The first stage can be called The reckless stage.

The characteristic of this paragraph is that I have no idea. I don’t know why I buy stocks when I buy them, and I don’t know why I sell them when I sell them. The decision to buy or sell is entirely driven by the impulse of others or oneself. For example, a certain stock critic recommends buying this stock. He believes that the stock will rise at least 10 points, etc. There is no rules when it comes to selling. You can sell it if you think you can make money. During this period, there is no way to stop losing money.

I have a relative who has never traded in stocks. One day he heard that I sold two stocks that lost money, and he immediately pointed out my mistake: "How can you sell stocks that lose money? At least You should wait until the stocks rise to make money before you can sell them. Sell the stocks that are losing money quickly. Don’t sell the stocks that are making money. You have to wait until they fall back to lose money before selling them. How can you make money from the stock market?" This paragraph. These words probably express the aspirations of new investors. After reading this book, readers should also be able to understand why investors with such a mentality cannot continue to make money in the stock market.

New investors have two distinctive characteristics: first, they are not greedy; second, they are not afraid. "Not greedy": As long as they have a little profit, they will sell their stocks to make a profit. "I bought 500 shares at 10 yuan yesterday, and today they have risen to 11 yuan. Sell them quickly. 500 yuan can buy a lot of food." As long as the price of the stock rises above their buying price, every nerve in the body will Everyone is shouting: "Sell! Sell! Sell!" What if they are afraid of falling back tomorrow? They are not greedy and are satisfied with making small money. "Not afraid": What should I do if unfortunately the stock worth 10 yuan a share drops to 9 yuan? The answer is: "Too bad luck, I'm stuck, I'll wait until it rebounds." If I'm stuck, I'm not afraid. I'm not in a hurry to use it anyway, I'll just wait. "They are not afraid of losing money, and they are never willing to lose small amounts of money. It is quite regrettable that from my observation, more than 80% of stock investors cannot graduate from this stage. Ask yourself if you have such a mentality? If so If so, you still have a long way to go in learning stocks.

2. The exploratory stage.

I have been in the foolhardy stage for about half a year. Fortunately. , I actually made money at this stage, which gave me great confidence in my understanding. Perhaps this is the good luck of a beginner. During this time, I began to read a lot of books about stock trading. I knew that it was wrong to act recklessly. , I began to experiment with "cutting losses and letting profits run"

First of all, I learned to stop losses. I first set a rule for myself, as long as the stock fell by 1 dollar from my purchase price, I would sell it. , In the future, such losses accumulated into a large amount, and the stock often rebounded as soon as it hit my stop loss price, so I foolishly kept stopping the loss, and the small loss finally turned into a large loss. I understood that the stop loss of 1 dollar was wrong. I started to increase the stop loss point from 1 dollar to 10%, and finally increased it to 20%. This lasted for two or three years. For example, I set the stop loss point at 30 dollars. At $27, when the stock rose to $35, I set the stop loss point at $31.50. As a result of the experiment, I traded less often, but I often sold stocks at $27 when I was losing money and exited at $31.50 when I made money. . In this way, the loss is 3 US dollars, and the profit is only 1.5 US dollars. Calculating the total ledger, it is still a loss.

This is not entirely the case when the stock price drops from 30 US dollars to 28 US dollars. The stop loss point is moved down, sometimes to 26 or 25 US dollars. I set a 10% stop loss for myself, but in practice the loss often exceeds the 10% amount. I know it is wrong, but I am afraid. This has happened many times when the stock price hits $27. When the stock rises, I usually have no problem selling the stock above the purchase price. If the stock price drops to $32, I will not sell it at $31.50. The stop loss price moved down because I already had a profit of 1.5 US dollars. The worst thing was that during this period, I tried to use special fundamental analysis to speculate in stocks, study the profit of the stock and the value of the company's assets, and study the cost-benefit ratio. You can get it. I tried all the indicators, but I still didn't make money. I tried to use technical analysis to find the lowest point and the highest point, but I kept ending up with "stop loss, stop loss, stop loss." I just can't see the profit. Stop loss scares me. I have also tried various computer calculation indicators, such as average line, William %, MACD, etc., but none of them are always effective. . It was hard to make money once in a while, but because the stop loss point was set too low, I didn't make much money. During this period, I not only lost all the money I was lucky enough to make during the foolhardy period, but also lost some capital. Not only did I work in vain for three years, but I also lost money. Don’t forget, during this period I was a full-time stock trader. I tried all the stock trading methods I had read about and imagined, but I couldn’t make any money. The various family mottos of Wall Street are read to the point where they can be memorized backwards, but in reality they seem to be completely ineffective. You can imagine how confused I was.

I lost confidence in stock trading and decided to try my luck in futures. I started speculating in gold, silver, foreign currencies, soybeans, oil, and wheat. The rules learned in stock trading seem to be completely ineffective.

Futures are more manipulative, I just lose money faster. At this time, my first daughter came into the world, and I felt a heavy responsibility. I really started to think about whether I should give up and change careers! If I can’t afford my daughter’s tuition fees in the future, how can I explain it to her? I spent nearly four years and got nothing. I lost my capital and changed my career. Come get a lot of experience. If I left my job and found another job, these experiences would be worthless. You can imagine how unwilling I would be. Futures trading is a very special industry. It does not pay attention to basic analysis. What price should you set for the Japanese yen or soybeans? It attaches great importance to technical analysis, of which the trend and the key points of resistance and support lines are particularly important. Putting these concepts back into the stock market, I suddenly felt that stock movements actually have traces to follow! I suddenly felt a light shining in my mind.

Let me stop here for a moment. Because the above stage can be called the exploratory stage of learning stocks. If you are still in the foolhardy stage, everything in this book may be too profound for you, and you still don’t understand what I’m talking about. If you are in the exploring stage, you begin to understand this book.

The characteristic of the exploratory stage is that you have more or less understood the rules of stock trading. You know you need to stop losses and let profits run, but you don't know yet how to stop losses. You use mechanical methods such as 10% or 20% to set the stop loss point. Sometimes you can do it, and sometimes you find ways not to stop the loss. When letting profits run, you don't know how far you should let them run, and you don't know how to determine the profit point. Various rules for stock trading are sometimes effective and sometimes ineffective, and you don't know how to apply them selectively. When you see reckless speculators, you already know that they are acting recklessly, and you know not to do that. Sometimes you make money, sometimes you lose money, but you still don’t understand why you lose money, and you don’t know how you made money. You don’t have systematic buying and selling points yet. The cost-benefit ratio of this stock is very low, the dividend of that stock is relatively high, Zhang Securities recommends this stock, and Li stock reviewers are optimistic about that stock, but you are still using your own Intuition coupled with "can't go wrong" reasons for buying and selling stocks. Do these descriptions fit you? If so, you are still in the exploratory stage.

3. Experience risk stage

The next step in the exploration stage is the experience risk stage. Sometimes these two stages occur simultaneously. Unfortunately, when you experience the risk stage, you often have to lose a lot of money. If you don't lose a lot of money once or twice, you won't understand what risk is, and you won't be able to graduate. Only when you lose money so much that you can't eat or sleep, will you truly reflect on why there are these rules in stock trading. It was at this time that the meaning of the rules became clear. After this experience, read Chapter 3, Section 2 "Fund Management (How to Bet on the Stock Market)", and you will truly understand what I am talking about. Every time I make a lot of money, I often lose a lot of money, because every time I make a lot of money, I feel like I "get it." This experience happened many times. This may be like swimming. Those who drown are those who "think" they can swim. People who know they can't swim or who actually know how to swim usually don't drown. If the experience of losing a lot of money happened during your reckless stage, I have deep sympathy for you. But if you really have several years of experience in stock trading and have worked hard to study stocks and their movement patterns, losing big money at this time is often the last test before you succeed. Please don’t give up! Those famous stock trading experts, They usually have one or even several bankruptcies before they start a family. These include Livermore and Baruch, both mentioned in this book. When you can't bear it anymore, please bear it a little longer. Back to my story. My biggest setback in stock trading occurred after "a flash of inspiration flashed in my mind." For more than four years, I worked in vain. For me, the stock market has become a place where "people with no money learn a lot of experience." I don't know how much I want to make a quick buck. In two weeks, I lost $53,000. The frustration is not in the amount of money, but in losing money this time which is completely undeserved. According to my rules, I will lose about $4,000, which is the limit of my stop loss. But I bet too much and refused to stop my losses in time. I made mistakes I shouldn't have made. I replaced analysis with hope. I thought I understood stocks, but actually I didn’t understand them all.

In the following month, I began to organize my thoughts, summarize the experience and lessons learned in the past five years, and combine my extensive reading over the years. The result is everything said in this book. In the past two years, I have followed the principles described in this book completely, and the annual return rate has exceeded 100%. It should be noted that such returns are achieved with minimal risk. I don't know whether I can continue to make such returns in the future, but I know that I have made a feasible stock trading plan. As long as I follow this plan, I will win if I bet for a long time. The only difference is that you win more and you win less, which has something to do with luck.

4. The long-term bet will win stage

Now we talk about the final stage of stock trading, the long-term bet will win stage.

A feasible plan cannot be imagined out of thin air, it must be well-founded. "Principle" is mathematical probability. If your chance of winning every time you bet exceeds 50%, and you only bet a small part of your principal, and you will not shave your head off just because of a few bad lucks, you will definitely win in the long run. . The principle is the same as opening a casino. "Evidence" lies in your knowing how to find critical points. In the process of long-term observation and practice, you know that these points are the key points for entry and exit. Operating at these points, your chance of winning exceeds 50%, plus the application of "cut-off" According to the principle of "take losses and let profits run", when you win, you win big, and when you lose, you lose small. Your winning probability is actually far beyond 50%.

At the stage of long-term gambling, you should not have any emotional fluctuations between losing money and making money. You no longer feel pain about stopping losses, you understand that this is part of the game, and you no longer feel joy about making money, you know that this is the inevitable result. You no longer care about winning or losing, you only focus on doing the right thing at the right time. You know the profits will follow.

Some people think that stock movements are predictable, while others say they are unpredictable. Both of these points are wrong. The stock game is a game of probability, and there is no such thing as 100%. Only with increasing experience can you increase the accuracy of predicting stock movements from 50% to 60% or 70%. Even if you can have a 70% accuracy rate, if you don't follow the principle of "cut losses and let profits run", your work may still be in vain in the end.

At this point, you are no longer obsessed with dead things like cost-benefit ratios or dividends. You are thinking about problems in terms of probability. How is the market for stocks? If the market is good, your probability of winning when buying stocks increases. What about a stock's cost-benefit ratio or dividend? If it's attractive, your odds of winning increase. How is the trend of the stock itself? If it is on an upward trend, your probability of winning when buying the stock increases. Use your experience to determine whether the movement of this stock is normal? If so, your probability of winning has increased. There are many other considerations, and you try to evaluate their utility using probabilities. You know that stock movements will be affected by large investors in the short term. A well-known stock commentator strongly recommends a certain stock. You can look at the technical graphics of this stock. If the stock has just broken through the critical point for buying, and there are signs of being secretly hoarded before then, you can suspect that the stock commentator may Joining hands with a certain large investor, we want to push up the stock price, but now is just the beginning of the push. If you buy, there should still be a long way to go higher, and you have a higher probability of winning. If the stock has soared a lot and stock commentators still take action, they are probably looking for the last fool, and you have little chance of winning by buying the stock at this time. The same "good news", you already know how to analyze and judge, and you no longer believe in "authority".

At this time you already know why you can make money, you have a set of action plans to repeat the experience of making money, you also know why you lose money, you have learned to stop losses when they fall, and you will not lose money. It becomes a psychological burden again. Because you know that you can make back the money you lose quickly. At this point, you know that you can make a living from stock trading. Whether you will make a fortune from this depends on luck. Chapter 7, "Seizing the Big Opportunity," tells about such opportunities and how to seize them. Such opportunities are rare, and the outcome is determined only by God. I wish you good luck and I hope you wish me good luck.

Does the knowledge of stock trading end here? The answer is naturally "no". Speculator Livermore said that he had been trading in the stock market for forty years and learned something new from the stock market every day. There is a saying on Wall Street: "If you can survive in the stock market for ten years, you should be able to continue to make money; if you survive for twenty years, your experience will be of great reference value; if you survive for thirty years, then you will When you retire, you will definitely be an extremely wealthy person.”

Every cycle, the rules for stock traders are still the same, but you will have a deeper understanding of these rules. You'll find more exceptions, and you'll learn how to enforce different rules in different circumstances.

Here I roughly divide stock learning into the foolhardy stage, the exploration stage, the risk experience stage and the long-term betting and winning stage. Not counting my experience in amateur stock trading, these four stages took me nearly six years. I have studied the biographies of many speculators. Their descriptions are different, but their experiences are similar. Reaching the stage where you will win if you gamble for a long time is a milestone in learning to trade stocks. At this stage, you can stay in this industry and wait for big opportunities. If you are lucky and you catch a few big opportunities, you will be upgraded from a speculator to a speculator.

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