⥣LiD1016⥣ commented on a stock · Jun 12, 2024 15:39

Sharing personal opinions on the "Fish the dip" trading strategy that most people use

$SIA (C6L.SG)$ $Genting Sing (G13.SG)$ $FTSE Singapore Straits Time Index (.STI.SG)$

This is an unsolicited article.

I have observed that most traders on the internet like to buy in when prices fall, which can lower their average price. This method is actually a commonly used trading method called dollar-cost averaging (DCA). However, almost all traders who unintentionally use this method make a fatal mistake: they have no profit target and stop loss target.

The result of this mistake is definitely: You won a cup of coffee but you lost a coffee shop.

Because first of all, most people's judgment of "dip" is often based on subjective awareness, with almost no indicators to assist in judgment, that is, "I think it's cheap now, I should buy some". So it is very difficult to determine the success rate of this method, and traders do not have a specific idea whether they are really buying cheap or buying at the highest price.

Some people may say, "As long as I keep buying cheap, my avg cost goes down, sooner or later when the price goes back up, I will make money." This mindset has three huge risks: First, traders are not mentally prepared for continuously spending money to buy, which may make the cost bigger and bigger. Second, the price will not go back above the avg cost before the company delists. Third, if the price only goes back after ten years, the return on investment is lower than just keeping the money in the banks. So, does this trade still make sense?

The initial mindset of a truly profitable trader is to calculate their expected return rate, which is win rate × win amount - lose rate × lose amount. If the result of this formula is >0, then this method will definitely make money. If it is <0, then it will definitely lose money in the end. If a trader does not have profit-taking targets and stop-loss targets, then the odds are?∶∞, and the result is:

Unable to hold onto gains when making money, and unable to stop when losing money.

To truly use the DCA method well, you must have a complete trading strategy, and you must clarify these several questions:

First, how much money will I invest at most in this stock?

Second, what is the basis for each time I "fish"?

Third, how many times am I prepared to "fish"?

Fourth, how low will my avg cost go at the minimum?

Fifth, how much money will I lose with my stop loss?

Sixth, how do I take profit?

Seventh, what is the win rate of this method? (Through backtest)

Calculate your expected return using these answers, which is the future result of your trades.

Wishing everyone successful trades.

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⥣LiD1016⥣ OP : Let's talk about risk first, then profit. No successful trading master does the opposite

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财不入急门 : nice tips

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⥣LiD1016⥣

Start: 16/04/2024 KC strategy Win rate 57.14% Win 28 Lose 21

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