Share personal opinions on the “Fish the dip” trading method used by most people
This is an unsolicited article.
I have personally observed that most traders on the internet always like to buy in when the price falls, which can make Avg price go down. This method is actually a commonly used transaction method called DCA (dollar-cost averaging) for short. But almost all traders who don't intend to use this method make a fatal mistake: there is no take-profit target or stop-loss target.
The end result of this mistake must be: You won a cup of coffee but you lost a coffee shop.
Because first of all, everyone's judgment on “dip” is often based on subjective awareness, and there is almost no auxiliary indicator to assist the judgment, that is, “I think it's cheap now, I should buy a little bit”. Well, the winning rate of this method is very difficult to determine; traders have no specific idea whether they actually picked up the cheap one or bought it themselves at the highest price.
Then some people will say, “As long as I keep buying cheaper, my AVG cost goes down, and sooner or later the price goes back, I'll make money.” There are three huge risks in this way of thinking: First, traders are not mentally prepared to spend money all the time, which may increase the cost. Second, the price will not return to AVG cost until the company is delisted. Third, if the price only returns after ten years, and the yield is not as good as putting the money directly in the bank, then does this single transaction still make sense?
The starting idea of a trader who can really make money is to calculate their expected return, that is, win rate x win amount - loss rate x loss amount. The result calculated by this formula is > 0, then this method must make money; if <0, then in the end, it must be a loss of money. If a trader doesn't have a take-profit goal or a stop-loss goal, then what are the odds? : ∞, the result is:
When you make money, you can't hold it; when you lose money, you can't stop.
If you want to really use the DCA method well, you must have a complete trading strategy, and you must understand these questions:
First, how much am I going to invest in this stock at most?
Second, on what basis do I “fish” every time?
Third, how many times should I prepare “fish”?
Fourth, how much will my minimum AVG cost be?
Fifth, how much will my stop loss cost me?
Sixth, how do I stop the profit?
Seventh, what is my win rate using this method? (Through historical backtesting)
Use these answers to calculate your expected return, which is the future result of your trade.
I wish everyone the best of luck with the transaction.
Disclaimer: Community is offered by Moomoo Technologies Inc. and is for educational purposes only.
Read more
Comment
Sign in to post a comment
Start: 16/04/2024
KC strategy
Win rate 63.89%
Win 23
Lose 13
251Followers
18Following
1514Visitors
Follow
⥣LiD1016⥣ OP : Let's talk about risk first, then profit. No successful trading master does the opposite
Peace love : nice tips![[undefined]](https://static.moomoo.com/nnq/emoji/static/image/default/default-black.png?imageMogr2/thumbnail/36x36 "undefined")