Teaching You to Trade Stocks 55: Buying as Foreplay, Selling at Climax
2007/5/28 8:12:41
The isomorphism of human behavior — if you study sex clearly, you'll have some understanding of human behavior. Stock buying and selling is merely one form of human behavior, and of course is no exception. Here we discuss this matter with utmost seriousness.
First, let's assign a gender to stocks. Why does this ID always like saying stocks are male consorts? Because they truly are male consorts — he, not she. Stocks are male in gender, and that's precisely what makes them difficult. Difficult in what way? Difficult in that climax is unsustainable, that after climax there must be a refractory period. And what gender should the investor be? The investor should be she, not he. The investor's investment capability should be like female sexual capacity — sustainable, with no refractory period. Using the vast sustainability of female "sexuality" to subdue the unsustainable weakness of male "sexuality" — this is the Way of investing.
The key to investing is the feminine — sustainability — and this forms the greatest contradiction in investing with the stock's masculine nature of unsustainability. The Way of investing is the Way of controlling male consorts, the art of mastering men, the method of absorbing yang to nourish yin. Absorbing yang requires attention to timing — if the fire is too young, absorption cannot produce the elixir; too old, and it's equally worthless. If the yang energy leaks outward, transforming into turbid essence, that's even more of a mood-killer. Stocks are the same — buying too early, when not a single yang has been born, is pure torment with no pleasure; waiting until the moment of climax without timely absorption means the yang energy is depleted, the turbid essence fully discharged, leaving nothing but a limp dead snake, and you're trapped instead. Due to the unsustainability of male "sexuality," the key to female "sexuality" absorbing and replenishing is to extract the essence. What is this essence? Begin absorption at the first return of yang, and abandon at the extreme of yang when yin is born. In more colloquial terms: buy during the foreplay, sell at the climax.
Buying and selling are asymmetric, and the corresponding strategies differ as well. Why? Because the states before and after a buy/sell are non-isomorphic. In the market, buying means exchanging money for chips, selling means exchanging chips for money. Money is time-independent — 1 yuan today is still 1 yuan tomorrow, as long as it's still money, it's unchanged. But chips are not — today's chip value differs from tomorrow's, and a constant number of chips is meaningless because what ultimately counts is still money. And due to the irreversibility of time, the two structures (money → chips) and (chips → money) are not isomorphic. This principle is extremely simple, everyone understands it, yet it forms the foundation of operational logic — the most fundamental things are often the simplest.
Therefore, for a large-level buying process, or what you might call a major position-building process, buying must be iterative — buying contains selling, constantly and flexibly adjusting the cost and quantity of position-building based on the current movement. The bottom area can undergo the most complex hub extensions and expansions, with only one objective: to acquire sufficient chips at continuously decreasing cost. This doesn't necessarily relate to being a market maker, though it can. A large-level buying process, to some degree, also carries the task of reshaping the stock's character, and this is also a bottom line — the bottom line for being able to exit smoothly. In this bottom area's character reshaping, there's a foreplay process — without good foreplay, there won't be a good climax. Note that the bottom doesn't have to be a horizontal hub oscillation at an equilibrium level; it can also be a relatively complex channel-style ascent, though generally such channels have very small slopes with intense oscillations — specifics will be discussed later.
A good buy with enticing foreplay, when departing from the bottom area, should already have its cost below that area. And during large-level hub upward shifts, costs should only decrease — only the most foolish markup would increase costs. The subsequent activity is essentially the continuous arousal of stock "sexuality," like a queen bee releasing pheromones to trigger the pursuit of drones — this is more like a spectacular NP process, where N keeps increasing, with various gaps and long bullish candles pushing this NP activity toward climax. For stocks just departing from the bottom, the first climax is merely the prelude to a night of wild revelry, setting the stage for the second, third, fourth, fifth, sixth, or even the tenth climax. The refractory period after the first climax is usually not long, but can be very violent with intense oscillations, and within this refractory period there's still momentum for continuing climax. Such stocks are like freshly developed male consorts — only the second, third, or even fourth and fifth climaxes will truly hit their stride. And an excellent sell exits during the flagging momentum and divergence of that large-level climax. The best state for a good market maker or large capital operator is having all their shares snatched away by crazed drones during that last large-level frenzy — those fools who build platforms to distribute shares, just go die.
Note, whether this ID is conducting an AV commentary above is not important. What matters is that stocks broadcast this NP-level AV live every single day. For ordinary retail investors, in larger-level interventions — for example, above the daily level — you don't necessarily have to enter at the first-type buy point, because the subsequent foreplay process may not be something ordinary retail investors can endure. Generally, you can wait for the second-type buy point to appear before considering entry, or even more directly, wait for the third-type buy point before entering. But if capital is of a certain scale and requires a certain quantity of chips, or if you need to accumulate experience for future whale-hunting activities, then an entry utilizing at least part of the foreplay starting from the second-type buy point is essential. Like large capital, you must also use the foreplay oscillations to lower costs and increase chips. What's the benefit? The most important benefit is familiarizing yourself with the stock's character — if you don't even participate in the foreplay, how can you possibly handle the subsequent N climaxes and refractory periods with ease?
Sex, when you get down to it, is just that one thing — everyone's basic operating mode is the same, namely the foreplay-to-climax model. Stocks are the same — their operating mode, at its root, is nothing but the combination of hub oscillations and movements across different levels, ultimately constituting the corresponding foreplay-to-climax model. All the same, but within this sameness, every stock has its own character, involving frequency, amplitude, form complexity, and so on. These are unique to each stock, which is precisely why movements unfolding according to the same model present vastly different final chart patterns.
Appendix:
No news over the weekend — two days of pent-up energy exploded today, producing a large gap. But the subsequent movement wasn't particularly strong, still just a balanced market. So the gravitational pull of this gap and the new hub constructed by this balanced market mean the technical pressure over the next three days cannot be ignored. Thursday is the monthly candlestick closing position, which happens to coincide with the gap's technical requirement of a three-day test period, so the next three days will see extremely fierce battles between bulls and bears.
Looking at the bigger picture, the 1/2 line at 4129 points will move up to 4144 points in June. The breakout confirmation on the daily chart's pullback test doesn't fully guarantee confirmation on the weekly or monthly charts. In the strictest sense, it takes at least 3 months on the monthly chart to confirm a truly effective breakout of this line. This is like the movement shown at the 1/4 line during January through March. Of course, the most ideal and strongest movement would be: May closes with a full bullish candle, June confirms the breakout with a lower shadow, and July continues with a long bullish candle to finally confirm the breakout's complete validity — but this is only the most ideal scenario, and the market may not ultimately produce it.
On the policy front, the regulation regarding market manipulation was partially exposed in newspapers over the weekend. Honestly, this regulation is a truly vicious move — some of its provisions have serious implications for the market's structure. In this ID's view, this is the first true dark cloud to drift over the market in the past two years. It's just that there are too many retail investors in the market now, and their reactions are generally slow, so they don't feel anything. Since the regulation is only a draft, there's still possibility for correction. The truly meaningful task ahead is to relentlessly attack this regulation, deeply expose it, and prevent the clauses that seriously harm the market from being implemented.
If the broader market can't close with a full bullish candle this month, this regulation and some policy developments in the coming days will be the main reasons. But everyone should keep a calm mindset — after all, policy is also part of the market's combined forces. They have it tough too, so let's forgive them.
For those above a certain level, you should have received some materials today. The specifics this ID cannot say, but the content is of course related to stock market regulation — it's expected to come out in the next few days. But how much effect these warnings will have depends on market reaction, which happens to align with technical requirements.
This ID has to meet some people tonight and can't stay to answer your questions. Signing off first, goodbye.
Replies
缠中说禅 2007/5/28 15:37:32
No news over the weekend — two days of pent-up energy exploded today, producing a large gap. But the subsequent movement wasn't particularly strong, still just a balanced market. So the gravitational pull of this gap and the new hub constructed by this balanced market mean the technical pressure over the next three days cannot be ignored. Thursday is the monthly candlestick closing position, which happens to coincide with the gap's technical requirement of a three-day test period, so the next three days will see extremely fierce battles between bulls and bears.
Looking at the bigger picture, the 1/2 line at 4129 points will move up to 4144 points in June. The breakout confirmation on the daily chart's pullback test doesn't fully guarantee confirmation on the weekly or monthly charts. In the strictest sense, it takes at least 3 months on the monthly chart to confirm a truly effective breakout of this line. This is like the movement shown at the 1/4 line during January through March. Of course, the most ideal and strongest movement would be: May closes with a full bullish candle, June confirms the breakout with a lower shadow, and July continues with a long bullish candle to finally confirm the breakout's complete validity — but this is only the most ideal scenario, and the market may not ultimately produce it.
On the policy front, the regulation regarding market manipulation was partially exposed in newspapers over the weekend. Honestly, this regulation is a truly vicious move — some of its provisions have serious implications for the market's structure. In this ID's view, this is the first true dark cloud to drift over the market in the past two years. It's just that there are too many retail investors in the market now, and their reactions are generally slow, so they don't feel anything. Since the regulation is only a draft, there's still possibility for correction. The truly meaningful task ahead is to relentlessly attack this regulation, deeply expose it, and prevent the clauses that seriously harm the market from being implemented.
If the broader market can't close with a full bullish candle this month, this regulation and some policy developments in the coming days will be the main reasons. But everyone should keep a calm mindset — after all, policy is also part of the market's combined forces. They have it tough too, so let's forgive them.
缠中说禅 2007/5/28 15:55:28
[Anonymous] Sina User
2007-05-28 15:48:54
Miss Chan — a question that's been puzzling me for days: after a third-type buy/sell point, from which segment does the new hub start counting??? The segment that forms the third-type buy/sell point? Or the +1 segment???????????
==
You must first understand the associative law. In hub (C) = (A) + (B), the preceding A must still satisfy the definition of a hub at that level, B must satisfy the sub-level definition and be complete, and then you check whether the pullback segment is sub-level complete — this is how you confirm the third-type buy/sell point.
缠中说禅 2007/5/28 16:04:26
Snow Wolf
2007-05-28 15:54:37
Blogger, hello — you've worked hard!
"When the movement reaches point d4, according to the principles above, there are only two possible decompositions: g0d4= g0d1+（d1g1+g1d2+d2g2）+g2d3+d3g3+g3d4= g0d1+d1g1+g1d2+（d2g2+g2d3+d3g3）+g3d4"
A question for the blogger: when the movement reaches point d4, which segment should g3d4 be compared against to judge consolidation divergence? My understanding is: if decomposed as g0d4= g0d1+（d1g1+g1d2+d2g2）+g2d3+d3g3+g3d4, compare g3d4's MACD with g2d3's; if decomposed as g0d4= g0d1+d1g1+g1d2+（d2g2+g2d3+d3g3）+g3d4, compare g3d4's MACD with g1d2's. Is my understanding correct?
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Correct. Here, regardless of which decomposition, the final conclusion is that d4 is a divergence point, so the significance of this point is great. Sometimes the two situations may be inconsistent, meaning the latter segment's strength falls right between the two preceding segments. In that case, the likely outcome is a pullback that meets the minimum range of the decomposition that is satisfied, but may not necessarily reach the minimum range of the decomposition that isn't satisfied. The specifics will be covered in future lessons.
缠中说禅 2007/5/28 16:08:09
[Anonymous] 水浴清蟾
2007-05-28 16:04:02
I'm currently using 000900 to study your theory — traded in and out several times already. Last Friday I spotted divergence and exited at 21.01, but today it surged much higher. I was looking at the 5-minute hub, but misjudged this time — 1,000 shares stuck. Now there's already 30-minute divergence. Still, I'm basically empty-handed except for 000900, so there's still a chance to lower costs.
==
Generally speaking, if you sold and didn't buy back, it's best not to develop the bad habit of chasing high to repurchase. If you sold, when technically permissible, you must buy back — otherwise your rhythm gets disrupted. Once you discover it surging higher again and chase it, you're actually more likely to get trapped.
缠中说禅 2007/5/28 16:14:06
[Anonymous] Sina User
2007-05-28 16:06:39
According to the "Market Manipulation Guidelines," the administrative department has too much power without any checks — this is big trouble!!! Unchecked power poses the greatest danger to the market. I suggest adding provisions to the guidelines constraining the use of investigative authority, as well as clauses for review, appeal, and re-examination of investigation results to prevent abuse of investigative power!!!
==
There are also many clauses that are overly strict and simply not operationally feasible. This ID will of course also work through influence to correct this matter, but this kind of thing requires everyone's effort — otherwise the ones ultimately harmed are everyone.
缠中说禅 2007/5/28 16:25:10
[Anonymous] 卖错了吗
2007-05-28 16:13:52
Yesterday I sold 777 at 13.58 because I judged it was a third-type sell point. But the subsequent movement was nothing like that — really depressing. Blogger, where did my judgment go wrong?
==
Regardless of whether it's 000777 or 600777, your judgment was wrong. Please get the definitions straight first. The price hasn't even left the hub — where's the third-type sell point?
缠中说禅 2007/5/28 16:28:12
[Anonymous] 大盘
2007-05-28 16:15:20
If the blogger finds reading webpages troublesome:
My questions can be simplified to:
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After a daily hub's 3 segments complete, it gaps up and leaves the hub's highest point, then gradually expands into a second daily hub, and every segment of this second daily hub after the gap consists of only one 30-minute consolidation trend type — does the first daily hub still have a third-type buy point?
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Does a third-type sell point allow sub-level consolidation departure + consolidation return as a combination?
==
As long as it's sub-level, it's fine. The key isn't here but in the associative law — everything within the parentheses must satisfy the definition. Specifics are in the answers to related questions above. Details will come in future lessons.
缠中说禅 2007/5/28 16:29:40
[Anonymous] 远帆
2007-05-28 16:20:26
Every time I sell at the third-type sell point on the 1-minute or 5-minute chart trying to do T+0 to lower costs, I just can't get the costs down — and even when I do, it's not enough to cover the fees. The result is costs keep going higher. Master Chan, what should I do about this?
==
That proves your trading channel, technical skills, etc. don't meet the requirements for operating at the 5-minute level or below. Just increase your operational level.
缠中说禅 2007/5/28 16:31:01
[Anonymous] 白玉兰
2007-05-28 16:29:34
Now I deeply understand the great significance of small capital not participating in consolidation. After I bought Beijing North Star, the opportunity cost is beyond calculation.
==
Correct. You must operate according to your actual circumstances — capital size, trading channel, available trading time, etc. all determine your operating style and operational level. You must choose wisely for yourself.
缠中说禅 2007/5/28 16:36:07
For those above a certain level, you should have received some materials today. The specifics this ID cannot say, but the content is of course related to stock market regulation — it's expected to come out in the next few days. But how much effect these warnings will have depends on market reaction, which happens to align with technical requirements.
This ID has to meet some people tonight and can't accompany everyone. Signing off first, goodbye.
缠中说禅 2007/5/28 8:14:16
Today's market commentary will be appended after market close. Signing off first, goodbye.