Earlier we talked about the concepts of first principles (supply and demand), the principle of volume and price, key points, etc., and choosing the right buying point is based on these theories. So, make sure you understand these to understand what you're going to talk about today.

Let's talk about an important idea first. It must be understood that the right buying point is not an absolute low. This is a cognitive misconception that many people have. 

Why is the lowest point not the right buying point? It's very simple, because when the lowest point appears, you can't prove that this point is the lowest point, that is, the lowest point cannot prove itself. For example, a stock falls from 10 yuan to 5 yuan, which you think is the lowest point, but it may continue to fall to 4 yuan or even 3 yuan. So, how can we prove that 5 yuan is the lowest point? It's very simple, no longer falling, rising to 6 yuan, you will know that 5 yuan is the lowest point. In other words, the lowest point can only be known after the fact, and for trading, before the lowest point is proven to be the lowest point, the lowest point you think is to guess. If the transaction is based on "guessing", it is obviously very dangerous.

Therefore, before talking about buying points, the first concept to correct is not to dwell on buying at an absolute low. There is always the idea of "buying at the lowest point" or "missing the lowest point", which will create huge psychological obstacles for trading.

So, if not the lowest point, what is the "right buying point"?

The correct buy point is the one with a probabilistic advantage. In other words, at the right buying point, there is evidence that the probability of rising is greater than the probability of falling.

So, what kind of position is the position with a "probabilistic advantage"? What kind of evidence can prove that there is a "probabilistic advantage"? This goes back to the first principle of trading - the supply and demand pattern.

The essence of price changes is the imbalance between supply and demand. Whatever the reason for the rise in stock prices, it is because there are more people buying and fewer selling at the current price, and those who buy need to pay a high price to buy. And vice versa, no matter what the reason for the stock price falls, it is because there are more people selling at the current price and fewer people buying, and those who sell need to sell at a low price to sell.

So, from the perspective of supply and demand pattern, there are actually two behaviors with probabilistic advantages:

1. It is rising
2. Can't fall

What does "rising" mean? It shows that demand is greater than supply, and there are more people buying and fewer people selling. This is the principle of breakout and uptrend.

What does "not falling" mean? It shows that the supply is shrinking, and there are fewer people selling at this time, and when no one sells, it only takes a little demand for the stock price to rise. This is the principle of relay and reversal points.

A strong market should buy what is "rising", because the market is strong, and what is "rising" will continue to rise and reach new highs; When the weak market or turns around, you should buy the "can't fall" because there are few strong stocks in the weak market, the sustainability is not enough, and the "rising" is easy to adjust, while the "falling" is relatively safe and easy to rebound.

Understanding this, you will understand that a fundamental feature of the market is that uptrends and bottom reversals tend to be complementary. When the main line is clear and the upward trend is strong, the stocks that are "rising" perform well; However, when the number of stocks in the market trending upward decreases and the main line is not clear, those at the bottom that "can't fall" usher in a reversal (or rebound) opportunity. Therefore, "rising" and "not falling" basically cover all buy point options with probabilistic advantages.

Remember these six words, all the confusion you encounter in trading can be found in these six words. Because the volume and price behavior we encounter in actual trading is sometimes not very standard, you will feel that it is difficult to grasp, at this time, using these six words to explain, it will often simplify complex problems, and it is easier to see the facts.

Combining the behaviors of "rising" and "not falling" with "key points", it can be refined into the following three buying points with probabilistic advantages that can be identified:

1. Break through the buying point

The stock price broke through from the consolidation platform, and the demand was greater than the supply at this time, changing the original supply and demand pattern, which is in line with the characteristics of "rising".

2. Relay buy points

(1) The stock price is in an upward trend (the upward trend indicates that the demand is greater than the supply) (the shrinkage is insufficient and cannot change the upward trend of strong demand), and at the same time conforms to the characteristics of "rising" and "not falling". The general trend is rising, and the small trend cannot fall.

(2) The stock price does not break the bottom of the range in the shock range (range shock indicates the balance between supply and demand) and the shrinkage (the supply of shrinkage is insufficient, and the pattern of supply and demand balance cannot be changed), which is in line with the characteristics of "not falling".

3. Reverse the buying point

The stock price has reversed the supply and demand pattern from the end of the downward trend or adjustment, and the demand overwhelms the supply and change the original supply and demand pattern, which is in line with the characteristics of "rising".

The positions of these three buying points are all positions where the supply and demand pattern is reversed or continued, and they all have probabilistic advantages. Breaking through the buying point and reversing the buying point is a change in the original supply and demand pattern, while the relay buying point cannot change the original supply and demand pattern.

Next, we will explain these three types of buying points in detail.

Break through the buying point

1. Applicable background

Strong market, trending market, market with a clear main line or individual stocks with independent market (with independent strong logic)

2. Volume and price pattern

(1) There is a sufficient platform to organize. The longer the finishing platform, the better, the form is compact in the sorting, and the trading volume is gradually shrinking, and the lower the better. Shrinking indicates that the supply is shrinking, and the willingness to buy and sell in the market is relatively low, and a little strength can break the balance, whether it is an upward force or a downward force.

(2) After full sorting, the market chooses to break through the platform upwards. The trading volume at the time of the breakout, the bigger the better, is a reflection of strong demand. The larger the trading volume, the more it can change the original supply and demand pattern, and the higher the success rate.

(3) We must remember that if we intervene at the first time of the breakthrough, the risk of being too far away from the breakthrough point (acceleration) is greater, so we need to wait for the relay to buy.

3. Cases

From March to July 2019, Shengbang began a four-month platform consolidation, in which the trading volume gradually shrank, indicating that the supply was exhausted. On July 9 and July 10, 2019, Shengbang shares broke through the platform in huge quantities, showing strong demand. At the moment of the breakthrough, the supply and demand pattern is reversed, which is the buying point, as shown in the figure below.

Later, as everyone knew, Shengbang started a wave of magnificent markets, starting from the breakthrough buy point (later there were many breakthrough buy points, relay buy points and reversal buying points), with a maximum increase of 10 times.

Relay buy point (contraction buy point, retracement buy point)

There are two types of relay buying points, one is the compensatory buy point in the uptrend, and the other is the range oscillation bottom buy point. From the perspective of supply and demand pattern, the difference between the relay buy point and the reverse buy point is that the breakthrough buy point and the reversal buy point must change the original supply and demand pattern, that is, the breakthrough of the consolidation platform or the reversal of the original downward trend, but the relay buy point cannot change the existing supply and demand pattern. Therefore, breakthrough and reversal buying points require great power (volume), while relay buying points require small power (reduction).

In trading, we may miss the breakthrough point, or because the market is weak and the sustainability is not enough, we take the initiative to give up the breakthrough buy point and wait for the breakthrough to shrink, that is, the relay point.In the uptrend, the core of this buying point is to "follow the general trend and go against the small trend", that is, the low point of the small cycle that rises in the large cycle.

1. Applicable background

Applicable background: breakthrough retracement, upward trend retracement, range oscillation bottom.

2. Volume and price pattern

(1) After a successful breakthrough, the stock price shrinks back and cannot break through the breakthrough point (falling below the breakthrough point means that the breakthrough has failed); In the upward trend, the stock price shrinks back to the key point; In the range shock, the stock price shrank back to the bottom of the range and did not break the bottom.

(2) In the process of stepping back, the trading volume shrank significantly. The shrinking volume indicates that the supply is insufficient and the willingness of sellers is not strong to change the existing supply and demand pattern. The volume and price pattern is manifested as a small entity K-line and a small doji.

(3) The premise is that after breaking through the buying point, in an uptrend or in a range oscillation, there is no retracement in the downtrend.

3. Cases

Case 1: On November 5, 2019, CATL had the breakthrough buying point mentioned above, and after the breakthrough, CATL shrank back and stepped back, and on November 18, there was a small doji in the area, and the buying point appeared. This buying point, in the subsequent uptrend, appeared many times.

Case 2: On April 1, 2021, Silan slightly increased the daily limit, successfully broke through, and there was a breakthrough buying point. On April 14 and April 21, the land volume stepped back on the breakthrough point, and the relay buying point appeared. Subsequently, a wave of upward trend was formed, and on June 3, the ground retraced again, and the relay buying point in the trend appeared again.

Case 3: After experiencing a wave of upward trend, Deye shares entered a correction in early August, forming a two-month shock range, in which there were three shrinking retreats to the bottom of the range, forming a relay buying point in the range. After the end of the range oscillation, the stock price chooses to go up, break through the platform, and form a breakthrough buy point again, as well as a pullback buy point in the trend.

The relay buy point should be the safest buying point, but also the most buying point, will frequently appear in the uptrend or range shock, if you have the vision and skills to find, all stocks, there will be a relay point, even if it is a strong trend stock.

Reverse the buying point

The above two buying points are applied in an uptrend or volatile market, and this third type of buying point is applied at the end of a downtrend. This kind of buying point is equivalent to buying a rebound or reversal in a decline, with a certain element of contrarianism, so the risk will be greater.

1. Applicable background

Applicable background: weak market, the later stage of downtrend adjustment.

2. Volume and price pattern

(1) In the downward trend or adjustment, the trading volume gradually shrinks to the level of land volume, which is the embodiment of supply contraction. In other words, this means that the power to sell is greatly weakened and no one wants to sell.

(2) After the amount of land, there is a positive line of volume, indicating that demand has appeared. The amount of land shows that in this case, the upward volume can change the original trend, and at this moment, the supply and demand pattern is reversed, and demand begins to prevail.

(3) The volume and price pattern is reflected in: the volume of the volume after the land volume is long yang, the volume of the volume is yang and the yin, the volume of the hammer line, etc., and the closing position is at a high level. The larger the trading volume, the better, and the more it can change the original downward trend pattern. In short, it is necessary to reflect that "strong demand" overwhelms "weak supply".

(4) Note that this kind of buying point cannot be bought when shrinking, and the volume can only be bought by the positive line. Because in a downtrend, the shrinkage can only indicate the shrinking supply, and cannot reflect the demand (the rise must be supported by trading volume, but the downtrend does not need volume, and the stock price can form a negative decline only by relying on its own weight), and only the appearance of demand can indicate a reversal of the supply and demand pattern. This is different from the drawdown in the relay buy point.

(5) There is also a situation, that is, in the later stage of the decline, if the market panices, it may fall in volume after the shrinkage, that is, the sharp decline after the slow decline, which is also a form that is easy to bottom out. This form shows that the psychological defense line of the last person who sticks to it has also collapsed, and finally can't bear it, and the most persistent person has been cut, and the bottom has arrived.

3. Cases

Case: Jingce Electronics and Taichenguang, in the downtrend, the trading volume has been gradually shrinking, and then there is a large volume of positive lines and negative lines, the supply and demand pattern is reversed, and buying points appear.

The above are three types of buying points, you will find that a stock will have a buy point many times in the process of operation. However, no matter how many buying points there are, they are basically in line with the patterns of reversal points, breakthrough points, and relay points, and these three types of patterns all appear at key points, which have a probabilistic advantage. Other points can be placed at will, although sometimes luck can make you successful, and the bear can still throw darts into rising stocks, but in the long run, luck cannot always make you successful, and the probability advantage can.

So, remember one principle: only trade at key points! Buy only at the right buying point!

Key points will definitely appear, buy points will definitely appear, and more than once. The most critical question is whether you can wait. If we can always wait patiently until the key point to place an order, don't do more a year, make a few successful transactions, and the annualized return of twenty or thirty points is actually not difficult, even very mediocre. Why can't most people do it? Lack of patience, restlessness in waiting, always in a hurry to enter.

Notes:

Finally, I would like to emphasize a few precautions:

1、When buying, it is necessary to combine the general trend and the strength of the main line at the same time, and choose which buy point to use。 If the market is strong and the main line is clear, and the market is sustainable, the success rate of breaking through the buying point will be greatly improved. When the market is weak or volatile, the breakthrough success rate will be greatly reduced, and it is easy to eat traps.

2、If the market proves that your buying point is wrong, stop the loss in time。 All transactions are probabilistic behaviors. The above buying points can only be said to be bought at the moment when the supply and demand pattern reverses, with the greatest probability of rising and the smallest probability of pullback, with a probability advantage. But don't think that meeting such conditions will lead to a 100% increase. To think with probabilistic thinking, all buy points can go wrong (refer to "Trial and Error Thinking" in the construction of the trading mindset model), you still need to set a stop loss price before buying to deal with possible extreme events. When you are wrong, admit your mistake in time, control the loss, hold it right, and use it with a 50% win rate, you can create very good returns.

3、It is not that these three types of buying points appear all the time, so be good at waiting。 In fact, the market is changing every day, but it is not always possible to fully meet these three types of buying points. This is why Livermore always talks about "waiting", if you can be good at waiting for this condition, not every minute to fight, ignore some unclear buying points, the chance of making money will be greatly improved.

4、Misconceptions about stepping back on moving averages。 Many people think that stepping back on the moving average can be bought, which I think is a misunderstanding. Because stepping back on the moving average does not mean that the supply and demand pattern is reversed on the moving average. For example, some people can buy back on the moving average because there happens to be a relay buying point, and the stock price has shrunk on the moving average, showing a shrinking supply. Some step back on the moving average, there is some volume behavior, but show strong supply, if you always hold the "step on the moving average" to buy, this situation is very risky. In other words, some people can buy back on the moving average, not because they step back on the moving average, but because the volume and price behavior that meets the conditions of the "supply and demand pattern" has appeared. So, I don't think the moving average itself makes any sense. My own reading has been out of the moving average, but I feel that there is a lot less noise.

Trading only at key points is the most important prerequisite for success. Of course, it is very difficult to actually do it. It's like the famous investor Qingze once said: "If one day I can't succeed in trading, it's not because I don't know, but because I didn't do it." ”

Knowing is only the first step, understanding and execution are two different abilities, and whether we can do it in the end depends on ourselves, and also distinguishes between mediocrity and excellence.

This article is reprinted fromSimplified release" public account