Buy when it goes up, sell when it goes down?

In Serial 1, I will reprint a section quoted from the book "Chugen-sen Build-up Method."

It expresses a flawed investment attitude that leads to a state of delusion.

Triggered by a piece of news, you buy thinking that stock A will skyrocket and could be a huge win. However, stock A moves contrary to expectations, so you reluctantly leave it in a "salted" position.

With the next news, you buy stock B, and then C... gradually your holdings increase.

Once your funds are full, you dispose of stocks with smaller drop ranges and buy new ones. Stocks that rise to some extent are sold for a certain profit, but after selling, they surge.

Always holding stocks that tend to be pulled down, and when the market improves, selling the ones that were quickest to catch the wave at a reasonable profit—essentially, you end up selling right when the originally expected "huge gain" begins to materialize.

You continue actions that result in "deterioration of your holdings"—letting go fashionable stocks and weaving in sinking ones—ending your life like this.

（From the first part of the New Edition of the Chugen-sen Build-up Method, Explanation）

Cutting the pulled stocks makes the loss final, and you want to lock in profits on rising stocks before they shrink... This is a very natural psychology. The quoted passage uses extreme expressions like "end your life," but repeatedly doing the opposite is not only a waste of time but something you should not experience.

Buying at the lowest price is a coincidence, so a slight pullback is normal. Therefore, you cannot worry about a small backward movement. However, if there is a pullback beyond a certain point, that is, if you feel "this might be bad" but also think "it won’t turn around unless I get a bit of a bounce," you should cut completely at that moment. Alternatively, you could consider a sudden short sale if you judge it to be so weak.

Conversely, a stock that makes you feel "let me close out safely" is often a promising "good stock" in the future, and you may realize that it is more correct to consider riding it up rather than to sell and escape.

These responses, combined with mechanical decision-making, form the "Chugen-sen Build-up Method."

By codifying parts that cannot be fully acted upon by discretion into rules, you calmly receive directives like "buy because it has risen," or "it has fallen; from here, sell."

As a result, you may lose with half-hearted oscillations, but when the trend actually surges upward, you can realize price gains in ways that seem impossible with discretion. Since it is a reversal system, you also do not miss selling when popularity wanes and prices drop sharply. This is precisely what makes it so interesting.

So, what is "contrarian trading"? And how about averaging down to improve the average price?

Next time, in Serial 7, we will explain. Please look forward to it.