Source: Assassin at Night
These are 9 wonderful views on stock investment from the derivatives tycoon "Assassin Night Walk" - "Frequently Asked Questions about Stock Trading". But the same applies to the crypto industry, especially for players who are new to crypto investment.
1. Question: If the market hits a new high and some of the stocks in your stock account also hit a new high, should you sell them and keep the stocks that have not yet hit a new high?
A: No. Stocks that have not reached new highs should be sold.
The stock index is the average of all stocks. The average has reached a new high, so the good stocks should also reach a new high. Those that have not reached a new high are lagging behind. Why should we sell the blue chip stocks that are above the average and keep the repeaters that cannot even reach the average? The brains behind the capital are the smartest and will not be politically correct. Most of the stocks that can enter the stock index have a large market cap, and there are many analysts and funds paying attention to them. There must be a reason for them to lag behind.
2. Question: Should I buy high-priced stocks or low-priced stocks?
Answer: If the question is a choice between two options, buying high-priced stocks or low-priced stocks, then you must buy high-priced stocks.
The head effect of high-priced stocks is obvious. Capital's attention to companies is mostly concentrated on head companies, and resources also tend to be concentrated in head companies. When retail investors buy companies with obvious head effects, they are riding on the wind of large funds and high-quality resources.
Don't touch low-priced stocks, especially penny stocks. Many funds and financial products cannot add penny stocks to their portfolios or targets, which greatly limits the buying of these stocks. Don't be fooled by the so-called experts who post their orders to buy a penny stock and see its price soar. This is actually the same as buying lottery tickets or playing slot machines. Small gambling is for fun, but it is impossible to get rich by making small profits. On the contrary, the possibility of losing everything is much greater.
3. Question: Should I hold a large position in a certain stock?
Answer: Never hold a large position.
Position control is the most important thing in stock trading, no doubt about it. The position of any individual stock should be controlled below 10% of the total amount of funds, preferably below 5%.
The risks of holding a large position far outweigh the benefits: If you hold a large position when you have little money, you won’t make much money. It’s impossible to become financially free all at once. Instead, you may waste your savings in vain, and waste time that could have been used to learn and improve your business. When you have a lot of money, you need to be more stable and hold on to it. You can’t lose money at any time.
4. Question: Should I join some stock groups?
A: It depends on your purpose of joining the group.
For most people, joining a stock group is to inquire about some picks, hoping to get rich if they buy the right ones, so give up this idea as soon as possible. No one will give away things that can be sold for free. People who really have this ability would have opened their own funds long ago, and would not give away things that they spent time, money and effort to research. Most people in stock groups just talk nonsense and have fun, anyway, they don't have to take responsibility. Isn't joining such a group just to listen to people bragging? It's almost like listening to crosstalk. If you join the group just to have fun and listen to crosstalk, then there is no problem.
5. Question: Are stocks that don’t have much room for growth still worth buying?
A: Not worth it. But it might be worth buying the bonds of these companies.
For example, some heavy industries, such as Alcoa, GM, and F, are half-dead, and their stocks cannot rise obviously, but they are unlikely to go bankrupt in the near future. You can buy some bonds at a good time. The same is true for some traditional companies affected by the epidemic recently. If a technology company with a market value of tens of billions does not make progress in the next two years, it is a question of whether it will go bankrupt or not. However, traditional industry companies with a market value of tens of billions can still remain half-dead for 5-10 years if they do not make progress.
6. Question: Both the epidemic and the protests are very bad now, so why is the stock market still soaring?
Answer: This year is a year of destruction before construction.
The current stock market cannot be studied using traditional valuation methodologies. But now the US government is forced into a desperate situation, with both fiscal and monetary policies being implemented simultaneously. The Treasury Department is responsible for directly distributing money to the lower classes, while the Fed is responsible for releasing liquidity and distributing money to companies and asset owners. Whether there is a bubble in the market is a topic of debate among economists, and any argument makes sense, and there is no correct answer. What asset owners can do is to see the essence of the game as clearly as possible, participate in it according to the rules of the game, and quietly leave when most people are crazy.
Question 7: If a stock plummets due to some news, should you buy the dips?
A: Depends on the stock plate size.
Market cap is small, so you can buy at the buy the dips and close your position quickly. The plate is small and light, so it is easy to oversell when hit by big funds, and it jumps up quickly. It's like a cricket, jumping up and down.
For stocks with large market caps, don’t buy the dips as soon as the news comes out. Large-cap stocks are followed by many analysts and have a lot of funds from all parties. Once bad news comes out, it will spread out layer by layer, with funds reducing their positions one by one, triggering margin calls, and then more funds reducing their positions, high-quality resources leaving, etc., all of which take time. Just like a mammoth, when it falls, it falls slowly, one leg kneels down, then the other leg kneels down, and then the body slowly loses balance, and finally falls down again. The whole process takes time.
