As a stock investor in the Chinese stock market, one must master various roles and have strong skills to make money in the market. The skill of replenishing positions is obviously essential. Mastering the correct replenishment techniques can make you feel at ease in the stock market, so when and how to replenish positions is what I will explain to you today.
Replenishment is a passive coping strategy after being trapped, which is not a good way to break free in itself, but it is the most suitable method in certain specific situations. As the decline in stock price increases, it actually increases the buying, thereby reducing the cost of purchasing stocks and waiting for the stock price to rebound and make profits. Although replenishing positions can spread the cost price, the stock market is unpredictable and may continue to decline after replenishing positions, which will expand losses. Therefore, it is necessary to carefully identify individual stocks that need to be replenished. Generally speaking, this method is suitable for stocks with high public awareness, performance support, and clear future growth expectations.
The essence of replenishment
Firstly, it should be clarified that replenishing positions is an investment technique, a tool, not a goal. The purpose of investment is to obtain returns with minimal risk, so it is only useful when replenishing positions can help investors achieve the above goals, otherwise it must be abandoned.
Some basic principles for replenishing inventory
Although restocking may seem simple, there are still some principles that need to be adhered to. Generally speaking, if a stock experiences a technical break, it is absolutely not advisable to replenish the position. Instead, it is important to carefully observe the subsequent trend before making a decision. If investors hold obscure or weak stocks, they cannot replenish their positions. Because these individual stocks have been dormant in relatively low positions for a long time, with stagnant stock characteristics, no funds to pay attention to, and no hot topics to speculate on. So, adding these stocks will occupy funds for a long time without being profitable. If investors hold strong stocks and popular stocks sought after by the market, they can make up their positions.
The best time to replenish inventory
Replenishing positions does not mean that just because the stock price drops significantly, one can enter the market and buy again. We must seize the opportunity to replenish our inventory. It is not appropriate to replenish positions too early. If a stock does not fall to the right level, there will still be a certain degree of decline in the future. It is a big taboo to replenish positions if old stocks have not been released and the replenishment has been trapped. It's not advisable to replenish positions too late, as funds will closely monitor individual stocks at low levels after they have been adjusted properly. Once the momentum of reversal is established, the opportunity quickly rises, and by the time the decision to buy is made, a certain increase may have already been formed. If you continue to chase high and buy, there is a risk of a pullback when you hit high.
Therefore, the best time to replenish positions should be to fully adjust short-term technical indicators. For example, if indicators such as KDJ and MACD have completely bottomed out and are showing signs of an upward turn, this is the time to replenish and buy. At the same time, when a stock falls near its annual limit, it is also a good opportunity for investors to replenish their positions. Generally speaking, individual stock technical indicators will form a certain level of support near the annual line.
The stocks for replenishment must belong to the following two types
Firstly, the short-term technical indicators have been fully adjusted, such as KDJ, which has completely bottomed out and formed an effective reversal technical form. This is a good opportunity for short position funds to gradually recover or replenish their positions.
Secondly, stocks with a clear operating rhythm of market makers and a well maintained medium - to long-term trend. Although the overall trend of the market is not good at present, many stocks in the two cities still maintain a healthy upward channel, and stop falling when adjusted to the annual line. Any patient and attentive investor can easily reach the bottom of the band around the annual average. Once entering the early high point area, resolutely sell, and patiently wait for the stock price to fall during the rest of the time.
Cannot replenish positions in the early stages of a bear market
Those who trade stocks understand this principle, but what if some investors cannot distinguish between bull and bear turning points? In the transition from bear market to bull market, in the early stages of bull market, during bull market, bull market to bear market, in the early stages of bear market, during bear market, bear market to bull market, during such a relatively large cycle, your investment strategy and trading system are complete, and your stock selection methods and profit models are stable. Many investors, in a bull market, consider themselves stock gods and believe that they have indeed reached a certain level. However, once they enter a bear market or when a bull market turns into a bear market, they feel lost and at a loss. Because the stock selection method and profit model are no longer effective. There is a very simple solution: if the stock price does not fall deeply, we will resolutely not replenish our position. If the current price of the stock is 5% lower than the buying price, there is no need to replenish the position, as any intraday volatility may lead to a pull-out. If the current price is more than 20% lower than the purchase price, or even when some stock prices are abruptly cut, it is possible to consider replenishing the position. The space for further decline in the future is relatively limited.
The market has not stabilized and there is no need to replenish positions
When the market is in a downtrend or experiencing a rebound, it is not possible to replenish positions, as further declines in the stock index will drag down the majority of individual stocks, except for a very small number of stocks that have strengthened against the trend. Before there is a significant increase in trading volume, investors should still adopt a wait-and-see strategy to maintain light positions. For those with heavy positions, they should moderately reduce their positions at high levels and wait for the market to stabilize before making decisions. The best time to replenish positions is when the index is at a relatively low level or has just reversed upwards. At this point, the potential for an increase is enormous, and the possibility of a decrease is minimal, making it safer to replenish positions.
Weak stocks do not replenish positions
Especially for those unbranded stocks that do not rise when the market rises and fall when the market falls. Because the purpose of replenishing the position is to use the profits from the stocks that were later replenished to compensate for the losses of the stocks that were previously hedged. Since this is the case, there is no need to limit oneself to replenishing the varieties that were originally hedged. When opening low and falling below the previous low, sell (sell out at the limit down price) weak stocks. When there is substantial bearish sentiment, if the opening price is low and the rebound cannot cross the opening price, and then it reverses and falls below the first wave of low points, the technical index weakens, and the market price should be quickly sold out. If it is not possible, it is necessary to make a sell order immediately when the second wave of rebound cannot cross the high point and then turns downwards. So, if you want to replenish your position, you should replenish strong stocks, not weak stocks.
Black horses that have skyrocketed in the early stage will not replenish their positions
There have been many leading figures in history who, after emitting a brief dazzling light, entered the darkness of a long night. They have long periods of decline and often continue to fall after a deep drop, with even deeper bottoms after reaching the bottom. Investors who spread out these stocks will only get more and more mixed up, and the deeper the mixed up, the deeper they will eventually get stuck in a quagmire.
Precautions for replenishing inventory
1. Before deciding to adopt this technique, one must be very familiar with the rules of the variety to be sold and their attitude changes at various stages of the variety. To achieve this, one must know oneself and one's opponent. To track the variety, there must be at least a process of going from rising to falling or from falling to rising.
2. This technique can only be used when the fundamentals of the market support the crude oil market to move out of a unilateral trend. If it is used during a volatile trend or a reversal, it is often not worth the loss.
3. We must follow the principle of pyramid to ensure that our costs are lower than the market.
4. Always realize that filling positions and making orders is just a technique, and filling positions is for making money. Don't fill positions just for the sake of filling them.
Eight skills for low-level replenishment
Market: replenish when stable, do not replenish when unstable
Stock type: familiar supplement, unfamiliar do not supplement
Performance: Good compensation, no compensation for defects
Trend: Supplement when rising, do not supplement when breaking
Rise and fall: compensate during a major drop, do not compensate during a major rise
Profit and loss: Supplement when there is a positive difference, do not supplement when there is a contrast
Rhythm: Supplement during callback, do not supplement during reverse draw
Storage space: can be replenished when light, not replenished when heavy
