What are left-side trading and right-side trading?

Finally, someone has explained it thoroughly, the "foolproof" trading method that very few people understand!

Left-side trading is actually a form of contrarian trading, also known as "when others are fearful, I am greedy; when others are greedy, I am fearful." Right-side trading, on the other hand, is a form of trend-following trading, which involves entering the market at the beginning of a price increase and exiting at the beginning of a price decrease.

01. Left-side trading, commonly known as value investing.

Refers to starting to buy when the price of a stock/coin drops to a low valuation area with a very high margin of safety, buying more the more it falls.

Then, wait for the time cycle and capital cycle, for the stock price to experience a value-repairing rise, reflecting its true value, and thus making a profit.

Right-side trading, commonly known as trend investing. It involves entering when a stock/coin shows a clear upward trend, following the funds as they ride the elevator from undervalued stock prices to overvalued stock prices. Right-side trading does not require waiting time; it only requires grasping the trend and acting accordingly to obtain profits brought by the capital premium.

As a small investor, trading on the right side will obviously have a higher capital utilization efficiency, resulting in a better overall return.

The "deep pit" of left-side trading
Why are some investment moguls, such as Buffett, better at left-side trading, while small investors are not suited for it? Left-side trading is like poison for small investors.

There are two main reasons.

1. Unable to control the value range.
Retail investors engaging in value investing is a false proposition. There are so many major institutions, so many fund companies, and brokerage firms conducting research on listed companies and market surveys, and sometimes the research reports they produce are utterly unreliable. As ordinary retail investors, how can we judge value and control the range of value? Many times, we mistakenly believe that a particular stock's performance is good, but after buying in, not only does the stock price decline continuously, but the performance also takes a nosedive.

Retail investors may know very little about a publicly listed company and can only make predictions about its future prospects based on some publicly available information. However, they actually have no concept of a reasonable value range. Therefore, while retail investors can engage in value investing, their search for a value range is somewhat blind, or rather, they can only rely on experience to make judgments. In this regard, compared to large institutional investors, who have a more comprehensive grasp of information, retail investors are at a disadvantage.

2. No patience for time cycles.
Large funds often have a more precise grasp of time cycles than retail investors. How many retail investors have acquired a bull stock but sold it during the early stage of the rise, just when they broke even? Large funds engage in left-side trading, which is an active strategy to capture profits, while most retail investors engaging in left-side trading are passively caught in losses and hold their positions passively.

Therefore, when there are some fluctuations in stock prices, especially during the process of breaking even, retail investors will be eager to sell. The trading mentality of retail investors is that they gradually lose their way during a decline, starting to doubt, and become hesitant and uncertain during a rise. The time cycle for left-side trading is also very long, which puts a lot of mental and physical strain on retail investors, making it hard for them to hold onto stocks/cryptocurrencies. Large investors typically have plans and strategies, with a clear understanding of their investments, while retail investors' patience is based on being stuck; once they break even, they naturally miss out.

Another point is that time is valuable. Large funds need to plan, while retail investors can choose stocks that are currently rising. Retail investors do not need to wait for a cycle with large funds; through trend trading, they can often maximize the value of their capital.

Large funds prefer left-side trading for another important reason, which is the issue of capital volume. Due to the large amount of capital, if one chooses right-side trading, there may not be so many chips available in the market. Left-side trading occurs during a panic sell-off, where chips are relatively abundant. One can continuously purchase while the market is declining, gradually "bottom-fishing" until the market reaches equilibrium and the bottom is fully formed.

Of course, retail investors can also engage in left-side trading. For those who have in-depth research on certain listed companies and are clear that these enterprises will definitely perform well in the future, making arrangements during a downturn is also completely feasible. The premise is that there must be clear expectations for performance, rather than just looking at historical performance and guessing future trends.

02. Advantages of Right-Side Trading
Having mentioned that left-side trading is not suitable for most retail investors, let's discuss what advantages right-side trading actually has.

First, we must understand that the rise in stock prices is not inherently due to performance or themes, but purely due to the capital's preference for that particular stock. This is why people often mention that stocks with good performance do not rise, simply because they do not favor that stock with good performance, and that's all there is to it.

Similarly, a stock/token always has a theme. Why didn't it rise before, but is rising now? On the surface, it seems that the theme has exploded, but in reality, it's just that funds have started to speculate based on that theme, and that's all there is to it.

Therefore, the source of all increases is the involvement of capital. The involvement of capital naturally forms the trend of stock prices, which is known as right-side trading, commonly referred to as trend trading. The entry and exit of capital occur over a cycle, so the formation of a trend to its end also has a cycle. Right-side trading involves entering at the start of the cycle and waiting to exit after the cycle ends.

The biggest advantage of right-side trading is following the trend of funds, avoiding the big pitfalls of time, and improving capital efficiency. It can be understood this way: gold will always shine, it's just a matter of time. Right-side trading itself is about panning for gold by following the funds, and taking action only after seeing the gold, which greatly reduces the time cost needed for panning.

In addition, there are other advantages to trading on the right side.
1. Avoid floating losses and stop-loss risks.
Left-side trading starts buying and building positions during a downtrend, which often indicates unrealized losses. However, in many cases, these unrealized losses can turn into realized losses. When you have no funds on hand and are in urgent need of cash, you must sell your stocks to liquidate. At this point, if the stocks are still in a downtrend or are not profitable, you face the awkward situation of having to cut losses prematurely. Specifically, it is easy to incur actual losses due to stop-loss measures. Left-side trading requires a long waiting period, while right-side trading can perfectly avoid and reduce unnecessary losses.

2. Avoid stock selection errors.
The second point is to avoid problems in stock selection. Retail investors have a weak judgment on the quality of stocks/coins, while this is a strong point for funds. When stock prices/coin prices rise and funds enter in large amounts, it indicates that the funds have conducted in-depth analysis on this stock. No large fund would be foolish enough to blindly take over; they choose to buy only after careful consideration and meticulous calculation. Therefore, selecting stocks based on funds is much more likely to make a profit than selecting stocks based on fundamental analysis. After all, funds are the driving force behind stock price increases, not those superficial performance metrics.

3. Hold patiently and pursue maximum profit.
The last point is profit maximization. If you buy a stock/coin and it keeps rising, without any psychological burden or pressure, it becomes easier to hold onto the stock/coin for a longer time. Some people may say they have a fear of heights regarding stock prices, which may lead them to sell off even if there hasn't been much of an increase. This is actually quite normal, as when the price exceeds their understanding, they panic and feel the urge to sell. However, fundamentally, the selling in this situation takes longer compared to being stuck in left-side trading and selling after being unstuck, resulting in potentially higher returns.

Several rules for trading on the right side
In fact, most veterans who thrive in the stock market advocate for right-side trading. However, it is not as easy as it seems to excel in right-side trading. Excellent right-side traders do not simply browse daily gainers to find stocks that break trends, as many might imagine. Instead, they are the ones who first place stocks with outstanding themes and strong fundamentals into their watchlists, waiting for the signals of right-side buying points to appear. Right-side trading actually has many iron rules; it is not just about chasing after breakouts.
First, trend breakout confirmation.
The first principle, which I don’t need to elaborate on, is trend breakout. However, many people still do not understand what a trend breakout is. There are three confirmation signals for a trend breakout. First, the stock price reaches a new short-term high; second, the stock price breaks through long-term trend resistance; third, the moving average shows a turning point upwards. It can be said that all three are essential, and only then is it a clear confirmation signal of a trend breakout. The primary principle of right-side trading is to wait for the signals to be clear before entering, and not to make any premature moves.

Secondly, the trading volume has increased.
The establishment of any upward trend is accompanied by an increase in volume, while the end of the trend is accompanied by a decrease in volume. This is an inevitable law, because the capital cycle works this way, from entry to exit. The increase in trading volume is a necessary condition for the beginning of a trend, and thus it is a principle that must be adhered to in trend trading.

Third, patiently wait for a false breakout.
Another point is that false breakouts can occur in trends. This situation is quite common; it may seem like a breakout is imminent, but after buying, one might encounter a continuous decline. At this time, it is essential not to average down. If the selected stock is viewed positively in the long term, one can choose to lie flat and patiently wait for the confirmation of the next trend entry point. If the selected stock is viewed positively in the short term, there may be a risk of stop-loss.

Fourth, wait for a pullback to add positions.
The last point is to avoid missing the trend and wait for a pullback to add to the position. For some individual stocks, the trend that appears is not a long-term trend but rather a short-term trend. It is very likely that after a trend buy point, hesitation will lead to a continuous rise. In this case, it is advisable not to blindly chase the high, because although the trend channel has formed, the slope of the channel has not yet been determined. The best approach is to patiently wait for the slope of the trend channel to become clear and to add to the position when the stock price pulls back.

Right-side trading is not as easy as it seems; otherwise, all funds would choose to enter the market through right-side trading.

However, the trading on the right side is not complicated in itself; it is a resonant behavior of capital clustering that forms trends, leading to a short-term premium in stock prices.

Ordinary retail investors, especially those without research and investment capabilities, are definitely wiser to choose right-side trading. Do not blindly believe in the so-called left-side trading theories of some big players; while they may be correct for the big players, they are not applicable to retail investors.

To accumulate capital quickly in the stock/crypto market, you must understand the essence of trend trading.

As for left-side trading in a bear market, the biggest advantage for small retail investors is that a small boat can turn quickly.

Grasping the advantages of capital flexibility is essential to potentially reap the benefits from the main players and earn the money that should be earned.