Three Methods to Set Up
In the book "Naka Gen Sen Ken-tama Ho" (Middle Origin Line Positioning Method), there is an explanation of "what technique refers to," emphasizing that one must maintain consistency from setup to close.
If you treat trading as just part of daily consumption, you’ll fall into the mindset of "buy the stock and that’s it." Trading is an act of increasing cash, so it is absolutely necessary to close out as a buyer when you sell, and to close out as a seller when you short-sell. For example, in mountain climbing, if you only think about reaching the summit and ignore descending, the activity of mountain climbing itself cannot be completed.
However, it is also important to consider starting point only—the initial “setup.”
From the book "Naka Gen Sen Ken-tama Ho," I will quote general theories about setups.
Here, it is explained by classifying into three methods.
- Method starting from the trial position — buy (sell) on a trial basis, then, once you can ride the wave, enter the main position.
- Method starting from the position for spread trading — for stocks, a way to reduce costs; for commodities, starting from a near-term buy and selling the farther-dated contract to ride the wave.
- Method to determine a standardized starting point — rely on statistical probabilities from analysis of indices, candlesticks, etc., determine the starting point with confidence, and then ride the wave afterward.
（From the first part of the 『新版 中源線建玉法』）（New Edition）中源線建玉法)
This classification is not claimed to be the only correct one, but it offers an interesting perspective. Let me explain each.
○ Method starting from a trial position
If you suddenly build the planned quantity, you tend to become anxious or obstinate, hoping it will succeed, so you should increase gradually in portions. Even if you feel “it might fail,” with a small quantity it is easy to cut losses honestly. In other words, position management by splitting.
○ Method starting from a spread trading position
It is a little hard to grasp, but perhaps “trial positions with a two-way setup.” For example, sell a relatively expensive near-month contract and buy a relatively cheap far-month contract to create a balanced position, using that as a trigger to build a one-sided main position.
○ Method to decide a standardized starting point
In addition to the yin-yang reversal of the middle origin line, there are many other possibilities. For instance, aiming for a breakaway with longing, entering in the direction of the trend (“breakout”), or if there is bad news and a stock hits limit down repeatedly, then once the quantities of buy and sell align and a price is established, you act—this is “event-driven investing,” among others.
As I noted, this classification is not the唯一正解 (only correct answer); you can classify, organize, and think freely according to your own sense. The point is to step away from merely “buying and selling,” “making profits or losses,” and sometimes think in a theoretical, rather than tactical, way.
From this perspective, the notions of “trading methods” and “techniques” clearly emerge, and it also creates opportunities to consider your own preferences and strengths and weaknesses.
We should maximize the freedom of individual investors. We want to act naturally, trusting our own sensibilities with a feeling of “go for it,” without pretense. However, it must not become a detached play; it requires an appropriate, bounded form of play within proper limits.
I believe this is what sets the stage for such alternative viewpoints of thinking.
