The key to controlling drawdown is to "rather not make money than lose money or lose less", which is contrary to human nature: investing in the stock market is meant to make money, but one has to give up possible earning opportunities (perhaps discovering later that there are no earning opportunities) and avoid possible risks (perhaps discovering later that there are no risks). The word 'possible' reflects many changes in the stock market, represents too much subjective will, and reflects a vague understanding of probability theory. People with different operating styles need to determine their own control drawdown mode.

The mode of controlling drawdown in the market:

1. If the trend does not match expectations or cannot be predicted, regardless of the future, we will be eliminated first

Take a look at the hot money trading on various boards. If you don't have the ability to control the stock price trend, you often have to leave on the second or third day because it's difficult for hot money to predict or control the trend beyond three days. Therefore, it's better to go first, even if you lose 10 points, you have to shed tears and cut your flesh.

The certainty of this pattern is that the probability of a limit up stock rising on the second day is greater than that of falling, relying on the combined heat of hot money and retail investors. This is also the result of long-term training by hot money (so the market strongly opposes Wenzhou Gang's behavior of breaking rules).

The uncertainty of this model lies in the heat of the overall environment: once the market heat is insufficient, it must be quickly cut and controlled to retreat. Hot money is afraid of stopping trading because it will reduce its popularity.

It should be emphasized that hot money can increase the probability of rising and decrease the probability of falling through capital push, while individual investors cannot; The advantage of individual investors is that they do not require too much liquidity, so controlling drawdown is more timely. If they cannot utilize their own advantages, they will only be cut off.

2. Control drawdown through trend patterns

The candlestick reflects the past and has a high probability of reflecting the future. There is a certain degree of certainty in buying and selling through candlesticks. There are many patterns that can be summarized from the high and low points of each stage, and the market makers are aware of these, so they deliberately draw lines to confuse retail investors. However, it is difficult to confuse the quantity (there are also cases where the market makers are inverted, which requires an increase in cost), and it can serve as an important reference.

For retail investors, the biggest psychological barrier is that they are very optimistic about a certain stock, but the candlestick shows selling and cannot let go. They are worried about selling and flying, but dare not chase the rise. Yes, candlesticks are not omnipotent: a stock with a bearish candlestick at a high position has a lot of volume, and no matter how you look at it, you have to sell it. Unexpectedly, the next day, due to the hot spot, the stock continued to rise, which is a common situation. My point of view is that special cases are rare, and the premise of controlling the retreat is not to lose. Therefore, if it rains and my mother wants to get married, let it go

This model not only requires technical expertise and vision, but also a positive mindset.

3. Control drawdown through moving averages

The moving average also reflects past data and cannot represent the future, but buying and selling on the moving average is also the result of long-term training: as long as many people believe it, a pattern can be formed; Similarly, as long as there is a fixed mindset, there will be deception: there are many examples of funds using breaking the moving average to cheat chips.

I thought the index was the least deceptive, unless it was the national team. However, it is temporarily assumed that the operation of national funds is aimed at maintaining the market (which may also fail, such as the 2015 market rescue), so the moving average of the index is a reliable reference for guiding and controlling the pullback.

4. Strictly implement the set profit and loss points

This relies on individual comprehensive abilities, such as dynamically setting the market during bull and bear markets, but it is actually difficult to define the market, so the criteria for judgment are subjective and vary from person to person.

5. Conservative control retreat

Find stocks with sufficient cushion, such as PE less than 10, PB less than 1, growth rate greater than 50%, etc. The thicker the cushion, the smaller the downward space, which is a safe way to control the pullback. The key to being greedy when others are afraid is the thickness of the cushion.

This model may have a low expected return rate and a long cycle, but with a good mentality and no fuss, and then pursue lottery style returns by playing new games. This is the operating mode of a bear market.

In short, people with different operating styles pursue different control rollback modes, regardless of right or wrong, in order to make big money without losing money.