Someone asked me, what is the essence of not making money from stock trading?

I have summarized it, and it comes down to eight characters, corresponding to two bad habits.

Buying too expensive and selling too early.

If you can fundamentally change these eight characters, it will be difficult not to make money.

Buying too expensive.

The so-called expensive purchase is actually buying at a high price.

This is a common phenomenon, and the essence behind it is that retail investors are always worried about missing out.

Every time they see a good stock, they make a decisive move.

They would rather buy the wrong one than miss out, as missing out is much more unbearable than being trapped.

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The key to the problem lies here, retail investors will not wait for a cheap valuation, they only look at whether buying now will rise immediately.

Someone inquired about the fundamental nature of not making profits from stock trading.

I have distilled it down to a concise phrase of eight characters, which corresponds to two detrimental habits.

Paying too much and selling too soon.

If one can make an essential change to these eight characters, it would be challenging not to earn money.

Paying too much.

The term "paying too much" essentially refers to purchasing at an inflated price.

This is a widespread phenomenon, and its underlying nature is that retail investors are perpetually concerned about missing opportunities.

Whenever they spot a promising stock, they act decisively.

They prefer to make a mistake in purchase rather than miss out, as the feeling of missing out is far more distressing than being caught in a losing position.

The crux of the issue is here: retail investors do not wait for a favorable valuation; they only consider whether the immediate purchase will lead to an immediate price increase.The vast majority of retail investors are technical analysts, but their technical skills are often very poor.

When technical skills are not sufficient to support the precision of buying points in trading, the best response for retail investors is to wait patiently.

By using time to avoid the risk of buying at high valuations, it ensures that they can buy at a relatively safe position with a low risk factor as much as possible, which can effectively increase the success rate of their investment.

Patience is a good medicine, which may make you miss many investment opportunities, but it will also help you avoid many investment risks.

You can at least do less loss, or even no loss.

As long as there is capital, there is no need to worry about not having good investment opportunities, and there is no need to worry about not making money.

Selling too early.

Selling too early refers to the fact that retail investors often make small profits and suffer large losses, and always miss the opportunity to hold a good stock.

Investment is actually not an equal game.

If you buy a stock without leverage, the maximum loss is 100%.However, your profits have no upper limit; they could be 100%, or 300%, or even 1000%, 2000%.

It is also entirely possible for stocks to increase by dozens of times.

So, theoretically, you have the opportunity to make a lot of money, but the key issue is that you might sell too early.

Retail investors rarely have the opportunity to hold onto their investments and make several times, or even dozens of times, their initial investment.

This leads to retail investors having relatively equal gains and losses when trading, and they easily miss the opportunity to make a lot of money.

This is another major mistake of retail investors: selling too early.

Of course, selling early is not necessarily a bad thing, because many times stock prices will fluctuate up and down like an elevator.

Taking profits when you can is also a smart approach, which can effectively reduce risk.

However, while the risk is reduced, the profits naturally decrease as well. The principle of "gains and losses come from the same source" is inevitable.

These eight words reflect the difficulties in retail stock trading. If they can be resolved, investing will no longer be a difficult task.When problems are identified, it is more important to think about some solutions.

Because only by finding the corresponding solutions can investment become simpler and simpler.

Focusing on the investment method of "buying too expensive, selling too early," you can list several core points.

First, do not follow the trend, do not take over at high positions, and would rather miss it.

If you do not want to buy expensive, you must know how to give up.

At least after a large-scale hype, do not enter the market at a high position.

The historical cycle tells us that any stock entering the bubble area, once it starts to adjust, the range is at least halved.

That is to say, if you take over at a high position, you will at least face a 50% loss risk.

There is no need to be too persistent in discussing what the real high position is.Whenever the stock price rises by three to five times in the short term, and by eight to ten times in one to two years, it is actually at a high position.

The increase in stock price is greater than the growth rate of performance, and the stock price is prone to generate bubbles, which is a relatively high position.

The larger the cumulative increase, the longer the cycle to digest the price increase, and the greater the risk of mid-term decline.

Funds like to overdraw the long-term space in the short term, and those who take over the baton not only lose time but are also prone to losing money.

Secondly, valuation and dividends are important reference standards.

Many retail investors will think that indicators such as valuation and dividends have no value, because junk stocks and loss-making stocks are still rising.

But in fact, these performance indicators are particularly important.

The rise of loss-making stocks does exist, but that is only temporary, and no stock that has been losing money for a long time can rise for a long time.

But there are stocks with long-term performance growth, and the stock price can also rise for a long time.

The key to the problem is that buying cheap itself needs to refer to the valuation.Low valuation and high dividend yield are the ultimate criteria for being cheap.

When your investment starts from a cheap price, the probability of making money naturally becomes higher than the probability of losing money.

Thirdly, have enough patience to wait for the stock value to be realized.

Investing actually requires patience because short-term trading is a game, while medium to long-term is called investment.

You may be lucky, and the stock price rises immediately after you buy.

You may not be so lucky, and the stock price only rises after a long time after you buy.

Every possibility exists, but essentially it is the realization of the stock value, reflected in the stock price.

Investing requires a certain amount of patience, whether it is holding stocks waiting for the price to rise or being empty and waiting.

You want to buy at a good price, and you want to sell at a good price, both of which require the baptism of time.

Fourth, relative diversification, betting big with small stakes through probability.Do not concentrate your investments too much; this is a piece of advice.

Investing too scattered will average out the returns, but being too concentrated carries great risks.

The essence of investing is to aim for a high return with a small investment, so it's not about performance, but about growth potential, about expectations.

Picking a few stocks with good performance expectations and investing in them in a diversified manner is the safest approach.

For example, if you invest 33% in each of three stocks, and one of them triples in value, then your final win rate is 100%, because one stock has covered the costs of three.

Probability is an interesting thing; without screening, it is ineffective.

But with screening, you can filter out a batch of relatively inferior companies, hold onto high-quality companies, and with a relatively low entry point, the probability of the stock price doubling is quite high.

Fifth, keep the good and eliminate the bad to find the real investment value.

Investing is a process of keeping the good and eliminating the bad, not a one-night stand as many people say.

We really don't need to hang ourselves on a single tree, but that doesn't mean we can buy stocks indiscriminately.It must be in the investment process, slowly screening for high-quality stocks, and then holding them for a relatively long term.

The so-called true value is actually the development prospects of the listed companies.

Throughout history, various types of listed companies have emerged, but very few have been able to maintain stable growth.

The result of retail investors not knowing how to keep the good and discard the bad is holding a lot of bad stocks and missing out on good ones.

At that time, the strong will always be strong, and you will find that truly high-quality listed companies have slipped through your fingers.

Stock trading is definitely not simple, but don't think too complicated about it.

It is a process of continuous screening and trial and error, repeating over and over again.

In the end, investment is a game of probability. Everything you do must comply with the rules of this probability game and calculate the final win rate.

However, the investment cycle may be longer than we think, and temporary gains and losses cannot determine the final success or failure.

Following the most fundamental rules is the fastest way to make money in stock trading.