Saturday, July 11, 2015

Stocks are conservative when they make money and take risks when they lose money

After the 'June stock market crash', many investors are entangled in conservative and risky plots.

Falling from the high, the account is now funded at half of the amount in the account a month ago.

A voice echoes in my ears all the time: take some risks, hold shares, and at the end of the year, maybe the funds will return to the glory of the high times. This is the sound of taking risks when losing money at a high point.

At the same time, another voice always remembered in my ears, take advantage of the rebound, hurry up and accept it, don't lose the rebound money. This is the conservative voice when it comes to making money at the bottom point.

Human nature has such a weakness, and it takes risks when it loses money in ticket speculation.

There is such a multiple-choice question: a, if you are out now, you will definitely lose 90,000 yuan. b. If you stay now, there is a 5% chance to earn back the 90,000 yuan you lost, but there is a 95% chance to lose 100,000 yuan.

After the high point fell, the people who still clinged to the stock obviously chose the answer B, when Chongbai fell at 47.26 yuan, many people chose B, and the result fell all the way to 20.67 yuan.

The answer given by "The Road to Freedom in the Financial Kingdom" is to choose A, because if you choose B, the amount of money lost is 10 * 95% + 0 * 5% = 95,000 yuan, which means that you have to continue to lose 5,000 yuan. Losses intensified.

There is another weakness in human nature: being conservative when making money.

There is also a multiple-choice question: a, if you are out now, you will definitely earn 90,000 yuan. b. If you stay now, there is a 5% chance to lose back the 90,000 yuan you earned, but there is a 95% chance to earn 100,000 yuan.

Presumably, this is a multiple-choice question that everyone needs to do urgently, and many people are struggling with this multiple-choice question. Obviously, staying and making money is a high probability event, but I am worried that there will be an extreme situation again, such as the second bottom, once this phenomenon occurs, the money that rebounds back is lost. Therefore, everyone is asking what to do next week.

According to the answer given in "The Road to Freedom in the Financial Kingdom", the answer is to choose B, and the money that may be earned by staying in the same way is: 10 * 95% + 0 * 5% = 95,000 yuan, and making more money is a high probability event.

However, it is necessary to remind you that you must beware of the 5% probability of losing money, once this happens, you must leave in time, so you must set an exit signal for yourself, and once this signal appears, you must leave the market unconditionally. The setting of this signal varies from person to person. Personally, I regard the short-term as my trading discipline line, and once the end of the market falls below the short-term discipline line, I will unconditionally get out of the active position stock to avoid suspicion.

Finally, the quote ends: "Stock speculators should cherish the good opportunity to make a profit, but once there are signs that the market is going bad, they must run away as quickly as a deer." ”