Small investor stock trading insights (Part 3): How to identify trend themes

StrawberryIce · 2026-02-04T08:21:46+00:00

The article discusses two strategies for stock trading: hitting the limit up and trend-based themes, pointing out that only certain themes such as new energy vehicles, AI, and commercial aerospace can become trends. It emphasizes that trend themes have characteristics like large imagination space, policy support, and foreign hype. The analysis covers the timing of buying and selling, suggesting that buying at high levels has a higher success rate, but short-term stocks with large gains carry significant risks. Additionally, it notes that trend investing becomes riskier in a bear market, and novice traders should prioritize safer trend investments.

StrawberryIce

2026-02-04 08:21:46

Abstract generation in progress

All sectors initially experience a surge when they start to be promoted, and then some sectors will become trending sectors. Picking the right stocks requires excellent trading skills and is difficult to master. However, trend trading is more suitable for beginners. I have summarized three key points that can make a sector a trending sector.
First, the sector has enough imagination space, reaching the trillion-yuan level.
Second, there are frequent national policies supporting this sector.
Third, there are related foreign stocks being promoted, creating resonance.
Let’s look at some examples for verification.

The promotion of new energy vehicle sectors in 2020-2021. If one hundred million people buy, it easily becomes a trillion-yuan market (since promotion mainly depends on imagination space, just set high expectations). At that time, new energy policies were frequently introduced every few months. Foreign markets also promoted Tesla, which caused Tesla’s stock price to multiply hundreds of times.
AI concept. A single Nvidia server rack is worth tens of millions, making a trillion-yuan market very achievable. The country also issued many artificial intelligence policies. Abroad, there was hype around ChatGPT.
Commercial spaceflight. A satellite is worth millions, and Elon Musk said he would launch one million satellites, creating a trillion-yuan market. The 14th Five-Year Plan also included commercial spaceflight as a strategic development. Abroad, SpaceX was being promoted.
Storage. It is inherently a trillion-yuan market. Due to price increases by several times, it’s equivalent to several trillion-yuan market. The domestic Yangtze Memory IPO is expected, with government policy support. Abroad, companies like SanDisk and Micron were being promoted.

Counterexample: Why is the brain-computer interface concept only suitable for short-term trading and not for trend trading? First, the market space is small, mainly used for treating brain diseases. Foreign stocks related to this are not very obvious.

How to find buy points? For trend sectors, you actually don’t need to find specific buy points. Why? Because I’ve discovered an counterintuitive experience: the higher you buy, the greater the chance of making money. For example, if I buy a stock that has already doubled, the probability of making a profit is 55%. If I buy a stock that has tripled, the probability increases to 60%. So I usually choose stocks that have already doubled or tripled.
Why? Once a trend is formed, it has strong inertia, making it difficult to stop in the short term. The more it rises, the stronger the inertia, and the higher the consistency, which increases the chances of making money. Here, I want to correct a misconception: whether you buy high or low, the long-term risk is the same. When the market declines, high-priced stocks will fall, but low-priced stocks will fall too, and the decline may be similar. Buying low doesn’t mean you have a lower chance of losing money.

However, I generally don’t dare to buy stocks that have risen too much in the short term, mainly because I fear a sudden large sell-off by the main players, which could cause heavy losses. This requires very high technical skills. Usually, I wait for a slight pullback before buying.

How to find sell points? Generally, if a stock falls sharply and the rebound is weak, breaking through several moving averages repeatedly, it can be sold.
Additionally, I often sell stocks too early. But if you sell too early, the most important thing is to buy back quickly. Many times, after selling too early, I don’t dare to buy back, and the more I hesitate, the more the stock rises, which makes you very angry .

Finally, the disadvantages of trend trading: First, the return rate can be very low. So if your technical skills are very good, it’s better to choose short-term trading. If you are a beginner like me, it’s safer to choose trend trading. Second, it’s hard to switch stocks flexibly. Short-term traders can easily switch stocks daily, but trend traders find it difficult to switch and may get stuck, missing out on other opportunities. Lastly, in a bear market, don’t do trend trading because the trend duration is short, the tolerance for errors is high, and pullbacks are very decisive, leading to losses when buying. In the bear market at the end of 2021, I lost up to 60% in four months; from August 2023 to August 2024, I lost over 70%.

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