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On the premise of understanding the cycle, the next step to do is to figure out where you are in the cycle.
We may never know where we're going to go in the future, but we'd better figure out where we're now.
There are two main ways to help us make judgments: the first is a fully quantitative analysis assessment – assessing the valuation level of the market price and comparing it to historical levels. The second is basic qualitative analysis and evaluation - we need to observe the behavior and sentiment of the investors around us. When you find that the market is all good news, investors are almost blind to the risks, and the valuations are ridiculously high, then you should be careful and not lose your vigilance.
We often say that a sense of location is important for making a good investment. For example, for cyclical industries, we should judge the prosperity position and valuation level of the industry when researching, and make a rating based on judging the prosperity trend. For growth industries, it is more about judging the growth stage of the industry and the company, which is generally called the 0 to 1 stage or 1 to 10 stage.
To evaluate the future trend of the cycle, it is necessary to choose different asset allocation strategies.
Concentrate forces on offense or defense, all allocation strategies are based on an understanding of market cycles.
The investment strategy is contrarian investing. In the panic in the market, everyone is reluctant to catch the "falling knife", and investors are overly cautious and adopt defensive investment strategies. Everyone believes that when there is no money to be made, it may be the time when you have the most hope of making money.
To grasp the cycle, investors need two kinds of capital to survive the downward phase when the cycle is down, one is emotional capital - to resist not cutting meat at the low point of the market, resulting in permanent capital losses, and the other is financial capital - to increase funds at any time or control positions in advance.
The so-called contrarian investment is often closely related to emotional control, and the most pessimistic moment may be the best time to buy.
There is nothing more frustrating and headache-inducing than seeing a friend make a fortune. But great investors tend to be able to analyze calmly in any situation.
Not to be happy, not to be sad is the best quality of an investor, whether it is optimistic or pessimistic emotions will affect the investor's view of things, excellent investors can control their emotions, without preference to analyze the risk of an event or information, because the biggest source of investment risk is to believe that there is no risk at all.
The stock market game is essentially a set of programs designed for people's thinking and behavior habits. In the process of investing, you need to manage yourself and manage your emotions - fear and greed. In this jungle-like market, if you don't want to be harvested, you must have a system of methods to make a living. However, as long as this method is not summarized through one's own deep understanding, but casually listens to a suggestion from others and asks about a bull stock everywhere, this kind of similar pursuit of martial arts cheats or wealth passwords will be a high probability in the end. Although you can make some money at a certain time, there are always various pitfalls waiting for you ahead.
The yin-yang swing trading system is a further implementation of the theory of cyclical investment. Based on long-term stock market behavior. Long-term investment is not the traditional long-term holding of stocks after buying, but first to achieve pro-cyclical and trend-following, delineate the range according to the industry cycle of different stocks, and then do short-term and short-term swing operations according to model signals. After review, this method has a very good practical effect. Once you do a good job in several important links, you can achieve compound interest accumulation of wealth in the stock market.
Author:
Song Zhenyu, a guest of "World Finance", is good at judging the inflection point of bulls and bears with cycle theory.
The author's views are only personal research results and do not represent the views of this column. The stock market is risky, and investors need to be cautious.