Teaching You to Trade Stocks 45: Holding Stocks and Holding Cash — The Two Most Fundamental Operations

2007/4/12 15:39:04

I've noticed many people have this confused notion, thinking that buying and selling constitute all there is to stock operations. In reality, for every transaction, buying and selling can be completed in less than a second. The two most fundamental operations that fill far more time between buying and selling — holding stocks and holding cash — are actually far more important operations.

Suppose you operate at the 30-minute level. After buying at a 30-minute buy point, you enter a holding-stocks operation. According to this ID's theory, you know with absolute certainty that a 30-minute sell point awaits ahead, which will declare the end of the trend type that began from that 30-minute buy point. Before this sell point arrives, you remain solely in the operation of holding stocks. When this 30-minute sell point appears, you sell, and then enter the holding-cash operation, until a 30-minute buy point appears. Holding stocks and holding cash are ultimately a form of waiting — waiting for that buy or sell point that is absolutely guaranteed by theory. All stock operations, ultimately, come down to just two words: waiting.

Waiting for the market's buy and sell points is different from waiting for a comet's arrival. For the latter, you can know the exact time very precisely. But the market's buy and sell points are grown into existence. The process by which buy and sell points grow is the process of a specific trend type's birth and death. These processes can be illustrated using a 30-minute trend type starting from a 30-minute first-type buy point "a":

A 30-minute trend type at minimum must form one 30-minute hub. Once this hub forms, the trend type can end at any time consistent with theory. Thus, the weakest trend type is one where the hub completes and immediately ends. In this example, starting from point a, after three overlapping 5-minute trend types complete, the 30-minute trend type ends. Using A1, A2, A3 to represent these three 5-minute trend types in sequence, the 30-minute trend type from a can obviously be expressed as A1+A2+A3. So in actual operation, can you know in advance whether this weakest trend will truly form? The answer is no. Not only is it impossible to know in advance whether this weakest trend type will truly appear, but no possible form of any trend type can be confirmed in advance. What does this tell us? It tells us that prediction is utterly meaningless. Trends are created through action — they are the result of the market's combined forces, not predetermined by some god. There is no god in the market. The market's direction is determined only by the combined forces of all participants. Large capital or high skill can use their force to guide the market and perform according to their own script, but no god can completely predetermine every detail of how a market trend type completes.

So if nothing can be predicted, what is the significance of this ID's theory? Although nothing can be predicted, all possible structures and types of trend types can be classified, with clear boundaries between each category. Therefore, all you need to do is observe the market's current movement, let the market choose among possible structures and types, then make your selection based on the market's selection. Note that this applies equally to large capital. Regardless of scale, all capital is ultimately just a component force within the market, not the combined force itself. Those who attempt to be the combined force, who dress themselves up as god, will ultimately end up with no grave to be buried in. As long as you are a component force, you must observe the market's current reactions and choose based on the market's present-moment selections.

For example, this ID can ignite second-tier stocks and can write super large-cap stocks into the script, but this ID has never thought of myself as god controlling the market. This ID is merely interacting with the market. Once the market's energy in a certain direction is guided to exhaustion, the natural choice is the opposite operation to interact with the market. This is a complex present-moment sensing process — one must perceive changes in market energy with the utmost sensitivity.

After the first hub forms and the trend type can end at any time, the subsequent classification is rather complex. Today there isn't enough time to finish, and it will be discussed in detail in the next lesson. But today's lesson is a key turning point in thinking. Two things must be made clear: First, after a buy or sell point operation, waiting is the most critical process. One must closely monitor the growth and classification of the corresponding trend type — all of this is present-moment. Second, buy and sell points are fundamentally determined by the growth status and classification of trend types. Conversely, the appearance of certain buy and sell points gives a clear delineation to the growth status classification of trend types. These are the critical details for observing the market.

(To be continued)

Replies

缠中说禅 2007/4/12 15:40:48

Amid the fear and the frenzy of top-calling gurus' fearmongering, Shenzhen's 10,000 points — from this ID's script — is already within arm's reach. As I said a few days ago, any regulatory body that can't even accept Shenzhen at 10,000 points should go home, wash up, and go to sleep. Don't overestimate the regulators, especially their intelligence. This ID has dealt with them for over a decade and knows exactly what level they're at. Now is the time to test whether their level has improved. If it's still at the previous level, then these next few days will be when they get successfully bamboozled by the traitors. Of course, this ID praised a certain Shandong native in June 2005 for truly being a Shandong man, and from then on, a bull market began that continues to this day. I hope the Shandong man continues to act like one — Liangshan is right there in his neck of the woods, after all. Don't crumble over some trivial matter.

From the perspective of a 20-year great bull market, Shenzhen's 10,000 points is a trivial matter. This ID has already written the 20-year script. On March 19th, the day of the interest rate hike, before the market opened, this ID posted the article "The Heavenly Sun Shines Naturally Over Divine China, Ten Thousand Nations Dance in Ceremonial Robes." Since then, the market has progressed exactly according to script. Of course, some adjustments along the way are normal — there may even be weekly, monthly-level adjustments — but the general direction is unchangeable.

Anyone who attempts to block China's rise will ultimately become nothing but a historical joke. Let the market move at its own rhythm. The regulators should first manage themselves and castrate their impulse to arbitrarily interfere with the market. If the market needs to correct, let it correct at its own pace.

I won't say much about individual stocks — let a hundred flowers bloom, let a hundred schools contend. Second-tier stocks opening up space, third-tier stocks following up — it's no big deal. Those who are scared should go half-position. Those with more courage should watch the 5-day moving average. Those with good technique — every day is a paradise for exploiting volatility with this ID's theory. For the truly steadfast bulls, who have been bullish since the second half of 2005 just like this ID, continue the 20-year script and keep performing until after 2225.

缠中说禅 2007/4/12 15:51:03
[Anonymous] 缠心雕龙

2007-04-12 15:43:37
Hello blogger. Another question about movement force. Since divergence mainly compares the force between two segments oscillating around a hub, and force currently lacks a very strict definition — only assisted by moving average area or MACD histogram area — there are still some cases in practice that cannot be determined.

Suppose a and b are both oscillations around a hub. Ignoring the effect of internal oscillations within a and b on the force area, treating a and b as straight line segments first — can "the duration of a multiplied by the price change range" be considered the force of a? If there's a connection A between a and b, does this A affect the calculation of a and b's force?

==
A rigorous definition requires knowledge of measure theory. With MACD it's the same — the precise calculation formula you should program yourself, but it doesn't have much practical significance.

缠中说禅 2007/4/12 15:53:37
[Anonymous] 百思不解

2007-04-12 15:45:37
Hello blogger!
Regarding the same-level decomposition operating procedure from Lesson 39: if an upward A2 has no consolidation divergence against A0, and subsequently a small-level divergence within A2 triggers a large-level A3 pullback, and A3 doesn't break A0's high point, and then A4 shows consolidation divergence or doesn't make a new high — should A4 be sold? The operation here seems very similar to the operating procedure for "divergence level smaller than current trend level" in Lesson 44.
Here (A0–A4) should still be a single trend of the same level as A0, right? Since A3 didn't break below the previous high, A3 can be seen as a new hub for the upward trend (A0–A4)?

==
As long as there's consolidation divergence or no new high, you can sell first. Of course, at the operational level.

缠中说禅 2007/4/12 15:56:05
[Anonymous] CCTV

2007-04-12 15:47:10
Long live sister's theory! From March 19 to today, I've more than doubled, earning 50%+ on 000802 alone. Continue studying, forever supporting sister.

==

The key is long-term growth. If you can sustain growth for 20 or 50 years, that's truly something.

缠中说禅 2007/4/12 15:57:19
[Anonymous] 替天行房

2007-04-12 15:53:08
Boss, it's 2025, not 2225.

[Anonymous] 你的样子

2007-04-12 15:53:14
2225?
Boss, don't we all need to achieve enlightenment to last that long?

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Sina doesn't allow edits. This isn't really wrong anyway — it just means until forever.

缠中说禅 2007/4/12 15:59:11
[Anonymous] 梁山泊

2007-04-12 15:57:08

Can the blogger share some inside information about Wuliangye??????????

==
Forget insider info — only look at buy and sell points. At a sell point, you must sell even if the Jade Emperor himself tells you not to.

缠中说禅 2007/4/12 16:03:47
[Anonymous] 也许认识你

2007-04-12 15:52:19
Blogger, in an uptrend, three 5-minute consolidations form one 30-minute hub.
They're (down-up-down) + (up-down-up) + (down-up-down). All 9 segments are at the 5-minute level (1-minute trend types). Does each consolidation have to be with no extension whatsoever?

Is the second (up-down-up) the consolidation hub formed in response to the second "down" in the first (down-up-down)?

If the first consolidation hub forms like this: in an uptrend, a sub-1-minute decline (a straight-line decline with no hub) + a 5-minute (up-down-up) + a 1-minute decline, these 3 parts form a 5-minute consolidation. Now the hub direction becomes (up-down-up) — is this still a hub in an uptrend?
If the first consolidation has extension, must the other two consolidations also have extensions?

==

Your concepts are a bit confused. If it's truly consolidation + consolidation, then it's hub extension or expansion. Except in same-level decomposition where consolidation + consolidation is allowed, it's not permitted in other cases.

缠中说禅 2007/4/12 16:06:38
A Grain of Rice

2007-04-12 16:03:03
Hello Chan MM!
Shanghai's volume shrank 7.9 billion today while Shenzhen increased 2 billion. Combined yesterday was 241.5 billion, today 235.5 billion. Logically this time the limit should be around 250 billion, right? Can the market's own laws take effect without regulators intervening? (Future capital inflow drops sharply)

=
Volatile corrections at this point are perfectly normal. Having studied this ID's theory, you should particularly welcome this kind of volatility. What this ID opposes is policy interference. In a great bull market, there's no need to stubbornly hold. When there's a sell point at a larger level, you can sell first and buy back later.

A bull — not a stupid bull. A happy bull who fully exploits volatility to reduce costs.

缠中说禅 2007/4/12 16:10:47
[Anonymous] 文科生的忧虑

2007-04-12 16:05:17
Sister: This liberal arts student isn't great at math, so let me ask quietly: CCTV doubled in one month. At this rate, in 20 years half the money in the market would be his. Luoguo has been lurking for months and probably has multiplied several times too. Your theory is so invincible, and your disciples are so smart and capable! Within 10 years, the Chan Army would monopolize China's stock market. Would you then have to fight among yourselves?

==
Once capital reaches a certain scale, you can't maintain that speed — not every buy and sell point can be participated in without limit. That's not how large capital plays. Those who can truly manage large capital and guarantee long-term profitability are as rare as phoenix feathers and unicorn horns.

缠中说禅 2007/4/12 16:22:35
[Anonymous] 百思不解

2007-04-12 16:09:44
Chán Zhōng Shuō Chán 2007-04-12 15:53:37
[Anonymous] 百思不解

2007-04-12 15:45:37
Hello blogger!
Regarding the same-level decomposition operating procedure from Lesson 39: if an upward A2 has no consolidation divergence against A0, and subsequently a small-level divergence within A2 triggers a large-level A3 pullback, and A3 doesn't break A0's high point, and then A4 shows consolidation divergence or doesn't make a new high — should A4 be sold? The operation here seems very similar to the operating procedure for "divergence level smaller than current trend level" in Lesson 44.
Here (A0–A4) should still be a single trend of the same level as A0, right? Since A3 didn't break below the previous high, A3 can be seen as a new hub for the upward trend (A0–A4)?

==
As long as there's consolidation divergence or no new high, you can sell first. Of course, at the operational level.

===========
Thank you, blogger.
Please also confirm the latter question:
Here (A0–A4) should still be a single trend of the same level as A0, right? Since A3 didn't break below the previous high, A3 can be seen as a new hub for the upward trend (A0–A4)?

-

Both are wrong. Details will come in future lessons.

缠中说禅 2007/4/12 16:23:55
[Anonymous] 瞎鼓捣

2007-04-12 16:12:11
Boss is absolutely right — holding stocks is most critical.
The biggest fear is not being able to hold winning positions, while holding onto losing positions rock-steady.

=
Wrong — it's not that holding stocks is most critical; holding cash is equally critical. After a sell point, before a buy point, how to hold cash firmly — that's equally critical.