The big pitfalls to avoid when trading stocks I have been trading in the ultra short term for 13 years since entering the market. I have compiled 12 pitfalls I have stepped into during these years and shared them with you. I hope novice friends can avoid detours and pay less tuition fees. The first pitfall: The realization of positive expectations is a huge pitfall This is the easiest sinkhole for beginners to step on. Many stocks suddenly released huge positive news, but instead of rising, they plummeted directly afterwards. There are many types of expected hype: 1. Fulfillment of performance expectations For example, Zhengdan Corporation announced a tenfold increase in its semi annual profit on August 5, 2024, which was extremely positive. However, the next day, it opened significantly lower and fell. The reason is simple: it had already released its performance expectations in April 2024, and the stock price skyrocketed since then, with the highest increase being nearly 10 times. By the time the actual performance is announced in August, the stock price has already been overdrawn. By relying on expectations to rise, once expectations are fulfilled, it means going from rising to falling. 2. Event/Time Expected Fulfillment For example, Shenzhen Huaqiang, a major distributor of Huawei. On September 9, 2024, Huawei held a new product launch event, and the stock price skyrocketed in August. On the day of the press conference, expectations will be fulfilled and the market will directly shift from rising to falling. 3. Completion of restructuring and expected realization The most classic ones are China South Railway and China North Railway in 2015. Under the expectation of merger and restructuring, the stock price has surged several times. After the merger was truly completed in June 2015, it plummeted all the way. The essence is: large funds rise ahead of expectations, sell when expectations are fulfilled, and keep newcomers at a high level to stand guard. The method to break through the game is very simple: Seeing the big positive news, first check if the stock price has risen several times. If it's because of this positive expectation that it's rising, don't touch it at all. Don't bet on a small probability of further increase, the risk far outweighs the return. The second pitfall: Don't easily think that you have "enlightened" yourself What you probably realize is not the Tao, it's just a combination of good market conditions and good luck. I have been trading stocks for 13 years and have felt enlightened countless times, only to be slapped in the face afterwards. The first time: In 2015, he made 20 consecutive profits and felt enlightened, but was rejected within two or three months. The second time: In 2018, the bear market made a profit of 45% for the whole year, which doubled in the first three months of 2019, and felt enlightened. However, it still experienced a significant pullback afterwards. There are only two reasons for making money continuously: 1. The market is good, everyone is making money, and you are just one of them. 2. The market is average, but if you are lucky and follow the right rhythm, the pattern is only suitable for the current market. When the market changes, it immediately becomes ineffective. True enlightenment requires going through at least one complete bull bear cycle, with stable capital growth of dozens of times, otherwise it is all self moving. As soon as it drifts, the market will give you a knife. The third pitfall: Don't communicate randomly and don't join stock trading communication groups As the old saying goes, playing chess with a stinky basket will make it worse the more you play. When beginners encounter problems, asking and joining groups everywhere is actually meaningless, it will only make you lose faster. The group is mostly composed of beginners at the same level, and no one can give you constructive advice. A true master will not bring beginners for free, nor will they communicate with them; Even if you don't have enough rank, you won't understand or have a biased understanding. A group of beginners coming together will only make collective mistakes and be harvested collectively. To avoid losing money, one must think independently. If you don't understand, review the historical market trends and don't ask beginners like you. Article 4: Don't blindly adhere to technical indicators I have studied most of the common indicators on the market, but eventually gave up on them all. In a bull market, most indicators are 'effective'; In a bear market, everything fails. The essence is not that the indicators are impressive, but rather that the market environment and probability are at play. The stock market is the result of countless people's dynamic games, with too many variables: sudden positive news, international situation, policy changes Technical indicators can only reflect the results of the previous game and cannot predict the next variable. The truly unchanging laws are human nature: greed, fear, chasing after the rise and killing the fall, herd mentality. Understanding human nature is more useful than understanding any indicator. The fifth pitfall: Don't learn the tactics of the crappy streets The tactics that everyone knows are equivalent to ineffective tactics. You will, I will, everyone will, and the result is: Either we can't grab it, or we'll smash the plate together - homogenization of models will inevitably fail. The reason why experts do not disclose their tactics is because once they are made public, they become ineffective. The things on the rotten street can only be used as a basic understanding, don't take them seriously and do them in a heavy warehouse. To earn excess returns, one must identify the blind spots in public perception. Article 6: Never use leverage Novices cannot handle leverage. Being right once is useless, not stopping losses once wrong may result in zero principal or even debt. Leverage can amplify psychological fluctuations and make you make low-level mistakes. I doubled my leverage in 5 days in 2020, and then withdrew all of it. Someone has gained leverage, but the profits have been reversed and losses have been incurred; Someone who wants to recoup their losses by adding leverage will only suffer deeper losses. Suggestion for beginners: Divide the funds into 10 parts and only take 1-2 parts for trial and error. Lost, indicating unsuitability, leave in a timely manner; If you make it, you can work steadily for 1-2 years before increasing your funds. Article 7: Don't buy hot and trendy miscellaneous tickets Novices dare not buy faucets, so they go to buy trendy and miscellaneous hair in the back row of the same theme. As a result, the leader rose sharply, but it rose slightly or even did not rise at all; When the market is divided, the leading companies can still reach a new high after a sideways adjustment, while miscellaneous expenses will plummet without looking back. Better miss out on hot topics than touch stray hair. This is the most classic short-term pitfall. Article 8 Pit: Do not replenish inventory The buying logic is bullish, and if it falls, it means the logic is wrong. The correct approach is to admit mistakes and stop losses, not to replenish positions and spread low costs repeatedly. Previously, there were few delistings, and many stocks were able to come back after falling; Under the current registration system, junk stocks are directly delisted. 10 times to replenish positions, 9 times to correct, one time to withdraw from the market, and directly return to zero. Article 9: Don't randomly search for the bottom No one can accurately copy at the lowest point, most of the bottom copying is done halfway up the mountain. Human nature fears high prices, so they dare not chase after the rise and always want to wait until it falls to buy the bottom, As a result, the rise was not profitable, and the decline was buried halfway up the mountain. Striving for a rebound is possible, but if you make a mistake, you must decisively cut losses and not carry on indefinitely. The tenth pitfall: Only by recognizing human nature can we avoid detours The stock market ultimately speculates on human nature. Common human weaknesses: 1. Self deception: After being trapped, find good news to comfort yourself, and the deeper the trap, the deeper it gets. 2. Being clever: always trying to catch the dragon head from head to toe, only to end up buying miscellaneous hair. 3. Love to fantasize: After buying, fantasize about connecting boards, changing cars and houses, which affects stop loss. 4. Inflation and inferiority complex: gain from drifting, lose from denying oneself. 5. Hasty for quick success and instant benefits: If you lose money and want to quickly recoup it, buying recklessly can lead to significant losses. 6. Jealousy and jealousy: It's harder to lose money than to go empty handed, and abandoning principles and operating recklessly. Overcoming human nature is the key to avoiding the vast majority of pitfalls.