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How do retail investors decide to cover their positions or stop their losses? What stocks can be covered?

How do retail investors decide whether to cover their positions or stop losses?

There are two views in the market on whether to stop loss. Due to different investment starting points and different perspectives, the views are also very different. One view is that stop loss is a sharp tool to reduce the further expansion of book losses and avoid deep lock-in, and it is a heroic act of a strong man cutting off his arm. The other view is that stop loss is actually a loss, which is a foolish act of selling your own stocks to the dealer at a relatively low price. These two views represent different market views and different operating styles. Even when encountering stocks being locked, the response strategies adopted are completely different. One will adopt a stop loss strategy , and the other will adopt a stock holding strategy.

After investors buy stocks and are trapped, the first problem they face is to choose between selling or keeping them, that is, between stopping losses and holding on to their stocks. The following criteria can be used as a reference for specific choices:

1. Distinguish whether the buying behaviour that caused the lock-in is speculative buying or investment buying. Investors who select stocks based on the fundamentals of listed companies and from the perspective of investment value can learn from Buffett's investment philosophy and do not need to worry about the temporary ups and downs of stock prices.

2. Identify whether the purchase is a bottom-scooping purchase or a rising purchase. If it is a rising purchase, once you find a misjudgment, you must decisively stop the loss. If you don't have this determination, you can't participate in the rising purchase.

3. Distinguish whether this speculation is a short-term operation or a medium- to long-term operation. The biggest failure of short-term operation is not the profit or loss at a certain time, but because of a small mistake, the short-term operation becomes a medium-term operation, or even a long-term operation. People who do not know how to stop loss are not suitable for short-term operation, and will never become a short-term expert.

4. Recognize whether you are a conservative investor or an aggressive investor. You need to recognize your own operating style and skills. For example, some investors have enough time to watch the market and have a sense of the market. They can reduce the cost of being locked in by using the intraday "T 0" or short selling in the short term.

5. Distinguish whether the market index is at a high or low level when buying. When the market index is high, especially when there are many profitable orders in the market, investors are complacent and boastful, you should consider stop loss.

6. Distinguish the size of the future decline of the market and individual stocks . If there is a large decline in the future, you must resolutely stop the loss, especially for some stocks that were relatively popular in the early stage and had huge gains.

7. Distinguish whether the main force is washing the market or selling . If it is the main force selling , you must resolutely and thoroughly stop the loss. But remember: the main force selling may not be at a high level, and the main force washing the market may not be at a low level.

What are the stocks that can be covered?

First, it contains a huge number of large and small non-tradable stocks. Even the banker has run away, so the chance of losing more and more is quite high.

Second, strategic investors with a strong desire to cash out are allocated shares, which simply means they take the money and run away.

Third, varieties with high prices and suppressed by national industrial policies.

Fourth, if you have stocks that have lost their momentum and the main market makers have completely withdrawn from them, you must exchange them instead of blindly adding to your position.

In the future rebound, there will be many stocks that cannot return to their previous highs, which must be vigilant. In short, the stocks to be covered must belong to the following two types:

First, when short-term technical indicators are fully adjusted, such as KDJ, etc., which have completely bottomed out and formed an effective reversal technical pattern, it is a good time to gradually recover or cover short positions.

Second, stocks with obvious market maker actions and intact medium- and long-term trends.

Obviously, the overall trend of the market is not good, but many stocks in the two cities are still in a relatively healthy upward channel. They will stop falling when they adjust to the annual line. Any patient and careful investor can easily copy the bottom of the band smoothly in the area of   the annual line. Once it enters the previous high point area, it is necessary to resolutely sell it, and wait patiently for the stock price to fall back in the rest of the time.

Covering a position is an important way for those who are heavily trapped to save themselves. They should strive to make clear judgments and avoid mistakes, otherwise they will suffer greater losses. The types of stocks to be covered should adhere to the principle of "covering the strong and not the weak, covering the small and not the big, covering the new and not the old". The meaning is that in any rebound or rise, the biggest opportunity belongs to the strong stocks , and the funds for covering a position must not be used to buy unpopular stocks, weak stocks, and stagnant stocks that appear in the shape of a straight line on the technical chart.

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