Reasons for Stock Losses Among Investors

I have been trading stocks for 17 years. In the early years, I had no knowledge of the technical aspects, but in the last five years, I delved deeply into research and finally gained insight. With the unique skill of "massive arc formation," I managed to achieve financial independence through stock trading!

Today, I am sharing my insights without reservation. I encourage everyone to bookmark this information, follow my updates, and study it repeatedly.

1. What is "massive arc formation":

This is a classic trend indicating heavy institutional accumulation. The stock price experiences a rapid increase accompanied by high volume, reaching a significant peak, followed by an adjustment characterized by reduced volume. The subsequent breakthrough above the 5-day moving average and surpassing previous highs serves as a decisive entry signal.

2. Conditions and details for the formation of "massive arc":

1. The stock price has recently experienced a significant increase in volume, reaching a new high; 2. After this peak, a period of consolidation occurs with reduced volume, leading to an arc-shaped candlestick pattern; 3. Trading volume may reach new highs over a span of 3 to 5 months; 4. The moment the stock price stands above the 5-day moving average and breaks through previous significant highs, it signals a timely entry opportunity;

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3. Key details to note about "massive arc":

1. This pattern signals a strong accumulation, and within it, various forms can emerge (differences in the duration of the arc, variations in volume, etc.). I suggest everyone grasp this flexibility and engage in research;

2. After an arc-shaped adjustment, a price surge typically follows, though its magnitude may differ according to the sector and individual stocks. Therefore, I recommend selecting thriving industries and high-quality companies for better results;

3. This pattern is an essential tool for institutional shakeouts. Maintain patience; once the price surpasses the 5-day moving average and breaks past previous highs, you can consider deploying investments in batches;

Selecting stocks is the foremost and crucial step in trading. It is no exaggeration to say that choosing the right stock accounts for half of the success. Therefore, prioritizing stock selection is imperative. Many investors have heard various technical theories, yet very few manage to make money. Throughout my life, I have relied solely on a 30-minute stock selection method at the end of the trading day, and after thousands of trades, I have never faltered! Here are three essential conditions we must adhere to when selecting stocks:

1. Different market trends require different selections.

In an upward trend, choose sector-based stocks; during consolidation, stocks that break through are preferable; in a downward trend, I refrain from trading sectors altogether. Even if I do, those stocks other than leading ones won't follow suit.

2. Choose leading stocks.

If I cannot make money with leading stocks, how can I profit from others? Even if I wish to invest in an entire sector, I focus on one stock with relatively concentrated chips as a frontrunner. Similarly, even during a rebound from an oversold condition, the stocks with the most concentrated chips will dominate.

3. Aim to buy during the closing hours.

This way, the day's chart will be complete, allowing us to clearly see our intentions without being misled.

The last 30 minutes of trading is when concentrated trading occurs, and it is the peak time for fierce battles between buyers and sellers, ultimately determining whether the direction moves upward or downward. It may even directly impact the next day's market trend. After a day of fluctuations, the patterns that should emerge will gradually reveal themselves during this period. If we select stocks and enter during this time, the safety and reliability will be higher. After a rise the next day, we can either exit immediately or hold on to achieve steady long-term profits.

1. Begin screening after 2:30 PM, opening the gain leaderboard and adding all stocks with gains between 3-5% to your watchlist. Stocks below 3% indicate weak performance for the day, which is not favorable for the next day's surge. Stocks exceeding 5% have already moved, and I do not recommend chasing them; focus instead on stable operations, as risks and potential profits would otherwise be compromised.

2. After the initial screening, rank by volume ratio and eliminate all stocks with a volume ratio below 1. A volume ratio below 1 indicates that the stocks lack trading activity and popularity, which significantly impacts their potential rise the next day. We must understand that stock surges require sufficient capital to drive them.

3. Proceed to a second screening of the remaining stocks by eliminating those with a turnover rate below 5% or above 10%. Stocks with turnover rates below 5% attract little attention, and for short-term trading, speed is imperative, thus turnover must be sufficiently ample. Stocks above 10% are too active, raising suspicions about institutional selling pressure, so we must reduce risk for stable operations.

4. After screening, the remaining stocks are relatively high-quality and meet strength criteria. The next step is to screen them three times based on market capitalization, eliminating those below 5 billion and above 20 billion. Stocks below 5 billion tend to be niche stocks or penny stocks that we should avoid, while those above 20 billion generally require substantial capital for upward movements, complicating rapid short-term gains.

5. After thorough screening, the stocks left are top-tier selections. We then examine them by trading volume and keep only those with consistently increasing volumes. Ideally, we favor a staircase pattern; we eliminate those with unstable volume fluctuations.

6. In the fifth screening, we analyze the candlestick patterns of individual stocks. In the short term, we check the 5, 10, and 20-day moving averages together with the 60-day moving average; the best scenario features an upward divergence. If the candlestick patterns are below significant moving averages, it indicates recent price fluctuations involve retracements from highs, suggesting excessive selling pressure ahead. We continue to eliminate stocks where there is any pressure represented above the candlestick, simplifying upward movements.

7. In the sixth screening, we select precisely using intraday charts to evaluate the characteristics of strong stocks. Those that outperform the market belong to a resilient segment of the market; only by choosing robust stocks can we maximize profits. It is even better to pair them with trending sectors, as this provides robust support. For instance, recent hot sectors include lithium batteries, small metal raw materials, and cyclical stocks. By overlapping remaining quality stocks with the Shanghai Composite Index’s intraday chart, we confirm that the stock price trends above the intraday chart throughout the day, indicating strong upward movement and a positive market atmosphere. This ensures that all investors can benefit, enhancing the potential for significant gains in the following trading session.

8. After six rounds of screening, the remaining stocks are extremely strong selections. Depending on market opportunities, there may be times when I can't filter any suitable stocks, which is completely normal. It's essential to remain patient and persistent, as opportunities favor the prepared. Focus on stocks that create new intraday highs after 2:30 PM. The best entry opportunity arises when the stock pulls back to the moving averages without breaking below them. Set clear profit-taking and stop-loss points; the essence of short-term trading is rapid, accurate, and decisive. If the market doesn't evolve as anticipated after securing a profit, exit quickly and pivot to safety.

Luo Zhenyu once said: "Regardless of one’s inherent energy, given sufficient time, you can become a friend of time through a long-term approach." In a world eager for speed, time consistently reveals that sometimes, slow is fast.

Successful traders possess a mindset of strength. They derive insights from their continuous experiences, adjusting their thinking patterns to align with reality while setting aside personal biases. This enables them to master the objective laws of things and people, conducting their affairs accordingly, thus embodying a true warrior mentality. Conversely, the weak typically base their actions on feelings and emotions, leading them to be easily swayed and ultimately culminating in failure.

Successful traders often rise from adversity, gradually gaining wisdom along their journey. What is wisdom? It is the understanding of the laws governing all things. When we uncover the rules of a particular industry, it resembles the teachings of the Dao De Jing: "Grasp the great image, and the world will follow." What in this world cannot be achieved?