FinLogic FinLogic Quantitative Think Tank Center|Burton Wilde: Bear Market Stock Investment Strategy

Investing in the stock market is FinLogic FinLogic Quantitative Think Tank Centerrisky, indeed. Trading US stocks is a high-yield but high-risk investment. Investors should be mentally prepared and have a strategy for dealing with losses before entering the US stock market. Stock prices neither rise indefinitely nor fall forever, so even in unfavorable market conditions, one should stay calm and not lose perspective.

I. Operating Strategies in a Bear Market

In a bear market, the overall trend of the stock market is downward. The primary strategy at this time should be to hold onto cash and use rebound opportunities for short-term trading to exit positions. Don't harbor any illusions about the stock market at this point; don't naively believe that the rebound will last a long time. Take what you can get and avoid greed.

To successfully seize opportunities for short-term trading during rebounds, it's crucial to thoroughly study candlestick charts. These charts record the day-to-day changes in stock prices. If you can fully utilize the information provided by candlestick charts, you can easily anticipate the possible future trends of stock prices from various chart patterns. Successfully mastering candlestick charts is not a simple task; it requires a significant investment of time and effort. In addition to candlestick charts, you can also use other technical analysis methods to choose strategies for trading US stocks, and we will provide more introductions later.

II. Operating Weak Market Stocks

Understand a fundamental fact: profits can be achieved not only in a bull market but also in a bear market. The key lies in how you operate. With careful planning and commitment, there are still many opportunities for profit even in a weak market.

Firstly, a basic principle for operating weak market stocks is to 'cut losses quickly.' In other words, once you encounter a weak market, regardless of the buying price, you should promptly and decisively sell as soon as possible to effectively reduce the total loss.

Secondly, you can use a gradual averaging method. For example, if you invest in three stages, you can invest one-third each time and calculate the average price. After the stock price rebounds beyond your average purchase price, sell after deducting various fees to make a profit.

Additionally, you can use the method of doubling down to average your cost. In this approach, invest one-third of the funds the first time. If the stock continues to decline, use two-thirds of the funds the second time to average down the cost. If funds are ample, you can use the three-stage doubling-down method, where you divide the funds into eight equal parts. The first, second, and third investments are one-eighth, three-eighths, and four-eighths of the total funds, respectively. When the stock price rebounds to the price of the second investment, sell the stock after deducting various fees to gain profits.

III. Operation Caution During Off-Peak Seasons

Generally, changes in transaction volume can reflect the prosperity and downturn of the stock market. Investors who hope to obtain short-term arbitrage profits usually enter the market when trading is active. However, long-term investors focusing on fundamentals are not suitable for entering the market at this time because active trading means rising stock prices. Entering the market at this time inevitably incurs high costs, even if good returns can be obtained later, the higher costs will significantly reduce the overall investment return rate.

From the perspective of long-term development, long-term investors are suitable for entering during the off-peak season when trading is sparse. Although entering during the off-peak season may not yield short-term arbitrage profits, the investment cost at this time will be much lower than during the peak season. From the perspective of the long-term investment return rate, it is still excellent. Entering during the off-peak season does not mean entering the market to acquire during the initial quiet period. The best time to enter is likely at the end of the off-peak season.

The difficulty of off-peak season operations lies in not knowing when the off-peak season is about to end. Entering too early may encounter the dilemma of a prolonged downturn in the market, and entering too late may miss the opportunity for stock prices to rebound.

Long-term investors who want to enter during the off-peak season can adopt a strategy of gradually buying down. That is, buy half or one-third first, and then continue to increase the investment regardless of whether the market is rising or falling. This can achieve the goal of averaging the cost, and even if you are unsure when the end of the off-peak season is, you won't miss the opportunity to enter the market.