The renowned investment master Munger once said,

"If I knew where I would die, I would never go there."

The meaning of this sentence is to tell us that if we know that a certain way of doing stocks will definitely lead to losses, then we must not do it that way.

Only by avoiding the pitfalls of losing money first, can we possibly make money.

There are many red lines and bottom lines in the stock market that cannot be touched, otherwise, one will surely step on a mine and die.

In my eyes, there are two red lines in the stock market that ordinary retail investors must resolutely avoid.

First, do not short sell.

For retail investors, never short sell.

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When you are bearish, choose to wait with an empty position, do not rely on short selling to make money.

You can sell stocks as an act of being bearish, but this is completely different from short selling.Even Warren Buffett sells stocks, but he never actively engages in short selling.

The fundamental logic of stock investment is to buy into high-quality listed companies and share in the returns they bring.

Short selling implies that you need to find companies with poor quality that are also severely overvalued.

The logic of stock selection here is already contrary to what the stock market itself is supposed to do.

When investment becomes a purely transactional behavior and makes directional judgments, it will move further and further away from the essence of investment.

The market allows speculative capital to speculate on stocks because such capital never makes money by short selling.

However, for those investors and investment institutions that maliciously short sell, deliberately short sell through borrowing, and profit from short selling, they will ultimately not end well. This is a red line that must not be touched.

As a retail investor, do not even think of profiting in the stock market through this method.

Secondly, do not trade stocks with borrowed money.

Trading stocks with borrowed money is not the same as financing and leveraging in the stock market.The so-called borrowing money to trade stocks refers to the idea of trading stocks with borrowed principal, aiming to make a profit without any real investment.

This approach is absolutely wrong.

The reason is also very simple, because it cannot last long, cannot be sustained, and cannot achieve profitability.

Borrowing money to trade stocks means that the investor himself has become a gambler, and gamblers, even if they make money by luck, will not stop.

Today you borrowed 200,000 to trade stocks and finally made 500,000, would you stop?

When you lose all your money, would you borrow another 200,000 to trade stocks again, or borrow more?

Human nature is greedy, no one can win a round and leave the gambling table, most people can't get off after they get on.

The final outcome is the same, unable to extricate themselves from losses.

The red line of borrowing money cannot be crossed, because this is a bottomless pit, not the right way to make money in the stock market.

Behind the two red lines are our bottom lines when entering the market, which are ironclad rules that must be followed.Do not take the wrong path at the very beginning of investing; if that happens, an inevitable downfall becomes a certain end.

Are there any other red lines in the stock market? Indeed, there are.

There is a widely recognized red line, which is not to engage in transactions that you do not understand.

However, I believe this red line is more of a gray line.

The reason why I say this is because on both sides of the red line, one side is a sea of suffering, and the other is a necessary path.

This is because everyone inevitably goes through this process.

Our investments start from complete ignorance, through a series of trials and errors, and then achieve some success.

The process of trial and error is to attempt some transactions that one is not sure about or even does not quite understand.

The key issue is not whether one can understand at the beginning, but whether one can summarize experiences and outcomes after the trials and errors.The path to success is paved by the experience of failure, time and time again.

There is no easy success in the stock market.

You might think that after buying, the probability of the stock going up or down is 50%, but the reality is completely different.

The probabilities of rising and falling are out of balance because there are market makers in the stocks who firmly control the potential rise and fall of the stocks.

Not understanding the background of the trade is that you do not understand the intentions of the main capital forces, and you do not know what they want to do.

After you understand the behavior of the capital, the accuracy of the direction judgment will be greatly improved.

But before that, when you want to try and make mistakes, remember a few important principles.

1. Do not do things that are completely uncertain and rely entirely on luck.

Trial and error is to verify the correctness of your own judgment, not to gamble on whether it will rise or fall.

So if there is no basic theory, there is no need to try and make mistakes.Learning from mistakes is not entirely correct.

Learning from verifying right and wrong is the right thing to do.

Things that rely 100% on luck are a red line and should not be done.

You can choose to wait and see the results of the stock market's ups and downs, rather than participating.

Because the mentality of gambling and the thrill of winning and losing will stimulate us to get deeper and deeper.

2. Control the cost of trial and error, and try to keep the foreseeable losses within an acceptable range.

It is correct to try and make mistakes, but we need to control the cost to ensure that we do not make mistakes in the process.

Trying means not betting heavily.

Trial and error is not for making money, nor is it for losing money in vain.

Trial and error is for you to experience and verify your trading theory, to see where the problem lies.So, controlling your position is the key point of trial and error; don't exhaust your principal before you even start making money.

3. Understand the boundaries of your capabilities and first become proficient in the transactions within your circle.

Recognize where your capabilities end, and never attempt to do something you're incapable of.

For example, if you try to research a listed company that you don't understand at all, it's unlikely to succeed.

After all, as a retail investor, the dimensions you can research are limited, and the information you can obtain is very limited.

Everyone has their own circle of capabilities; money beyond your circle is impossible to earn.

Strengthening, refining, and specializing in the abilities within your circle is the key.

There are many profit models in the stock market; as long as you can do one of them well, you can make money.

4. If you cannot integrate knowledge and action, do not attempt trial and error, because it has no value and no result.

Trial and error is necessary, but it also has a bottom line.If you cannot achieve the unity of knowledge and action, then all attempts to try and make mistakes are worthless.

Because the results of trial and error, whether right or wrong, are biased.

For example, selling a stock at a certain point in time is a way to try and make mistakes.

If the stock price rises after selling, it means your trading idea is correct; if it falls, it means your trading idea is wrong.

Only by achieving the unity of knowledge and action can trial and error be valuable.

5. Reflect and introspect frequently, trial and error require summarization, and reduce the recurrence of mistakes.

Reflect and summarize more, and never repeat the same mistakes.

Some pitfalls are enough to step on once, stepping on them for the second time is called not remembering the lesson, and stepping on them for the third time means you should quit stock trading.

People who do not remember the lesson are not suitable for stock trading.

Because stock trading is about repeating the right things and accumulating small profits into a profitable model.Once you have stepped into all the major pitfalls and ensured that you will not make the same mistakes again, you will at least not lose a lot of money.

The remaining part is actually the right timing and favorable conditions in investment, which determine whether you will suffer a small loss, make a small profit, or have the opportunity to make a big profit.

A mature trading system does not guide you on how to make a lot of money, but first writes on the first page how not to lose money, and the rest are methods to make money.