Those who invest in the stock market for a long time are rarely not trapped. Many people believe that 'being trapped is long-term, while gaining profits is short-term'. I believe that the purpose of many investors entering the stock market is to make money, not to taste the taste of being trapped. Since stock market investment is inevitably trapped, what should small and medium-sized retail investors do if they accidentally get trapped while investing in stocks?

Generally speaking, when buying stocks, investors usually adopt four ways to deal with it: first, wait and see; The second is to reverse the price difference; Thirdly, timely stop loss; The fourth is to choose a lower price to replenish the warehouse. The four methods vary depending on the time, let's talk about two first.

Wait and see

In stock market operations, many investors, once trapped, lie down and wait for liberation, comforting themselves: "This is losing time without losing money." They see it as a principle of "resolutely not cutting meat. Some people have even brought up the secret of Warren Buffett, the world's investment guru, to becoming rich: "Firmly hold onto stocks that are optimistic for the long term." This is used to justify the behavior of being trapped and waiting. If we extend the time to 10, 20, or even longer, the idea advocated by Buffett is definitely correct, because according to the famous Keynesian theory in economics: the total wealth of society always increases with time, so the stock index or stock price will continue to rise with the increase of the total wealth of society. But waiting for such a long investment time is not very practical for most ordinary people. Looking at the performance of the US and Chinese securities markets in recent years, it is not difficult to find that mature markets generally have a bull long bear short trend, but in immature markets, it is often a bear long bull short trend.

But it cannot be denied that in many cases, buying stocks is hedged and holding stocks is a wait-and-see tactic

The method of liberation or even waiting for profit is a helpless choice for many traders. We need to emphasize that buying stocks while being trapped and passively holding stocks to observe is conditional. The premise of adopting this approach is that the entire market tends towards a medium to long term strong market, the social, political, and economic prospects remain bright in the foreseeable future, and the market transactions remain active with numerous investors participating. The key to these prerequisite characteristics is that the market is still in a strong atmosphere. As long as the market is confirmed to be still in a strong market, buying stocks, being hedged, holding stocks, and watching is the preferred means for investors. Only when the market is in a weak atmosphere, timely stop loss and choosing lower positions to replenish are the methods that investors must adopt after being trapped.

Reverse the price difference

Once stocks are trapped, the negative approach taken by ordinary investors is to "endure and hold on". But it has been proven that when the market trend is a continuous decline in volume, the effect of using the above methods is not desirable. Many stocks, if trapped at high levels, are likely to remain trapped for many years and cannot rise again. Due to deep hedging, many investors have missed the best opportunity to cut losses, but cut it off, even if it suddenly rises one day. This is neither covering nor cutting. Using 'reverse price difference' is a good way to reduce losses and save oneself.

The so-called 'reverse price difference' refers to selling a trapped stock at a relatively high level and then buying it back at an appropriate low level. The outcome of this process is that there is no shortage of stocks in hand, but there is an additional price difference of high selling and low buying. As long as the operation is appropriate and repeated, some losses can be easily compensated for. If the market rebounds significantly in the future, it can even be easily eliminated. This is much better than holding onto stocks.

Some people may have tried the method of reversing the price difference to solve the problem, but it seems to be ineffective. What are the reasons? The key to successfully reversing the price difference lies in finding the right timing to sell and buy. The general principle is: while the market is rapidly rebounding, observe the performance of the trapped stocks. If they do not keep pace with the market during a large volume rebound, but instead contract and stagnate, then they should take advantage of the later stage of the market rebound to sell off the trapped stocks. Subsequently, the market plummeted rapidly, and even took advantage of the opportunity of the market or the underlying stocks hitting new lows to buy back at low prices. There are two ways to buy back the quantity: one is to buy back as many shares as were originally sold; Another way is to buy back all the money earned from selling the stocks. Due to the use of high selling and low buying methods, it is believed that with a certain price difference, the first method mentioned above will increase the remaining money in hand, while the second method will increase the number of stocks in hand.

Of course, reversing the price difference will both succeed and fail. If you sell a stock and it doesn't fall, but instead rises, then this approach has failed. But if investors have a high level of technical expertise and market sentiment, it is better to actively operate and earn price differentials rather than being trapped in passive losses. It is worth pointing out that the method of "reverse price difference" is more suitable for markets with unilateral declines and individual stocks that have been declining all the way. Markets and individual stocks with bearish market trends are suitable for reverse price differentials. The method of reverse price difference is more likely to succeed for weak stocks, while it is not suitable for strong stocks. In fact, institutional main players or market makers often adopt the method of reversing the price difference when intervening in stock hedging, often continuously reducing positions at relatively high levels or when the market is soaring, and constantly replenishing positions at relatively low levels or when the market is hitting new lows. Of course, institutional main players have more initiative in reducing or replenishing positions than individual investors.

The stock proverb goes, 'When you rise, you earn money; when you fall, you earn stocks.' In fact, it refers to reversing the price difference.

Investment requires rationality and methodology: technology is relative, and I can only do my best to ensure it will always be right. However, I will do my best to be right, and that's enough! At present, the analysis of the future is actually based on predictions of technical factors, and cannot be said to be 100% certain. Therefore, for any analysis, do not approach it with a gambling mentality. The Chinese stock market has gone through a long bear market and has not come easy so far. In terms of major cycles, the footsteps of a bull market are underway, and operations still need to pay attention to methods and strategies. We cannot act recklessly, nor blindly chase after high prices, gamble, and wait for heavy positions just because the overall direction is improving. This kind of thinking is definitely wrong.