The most important lesson for beginners: What preparations should be made before the market opens?

What information is needed for the market open the next day
1．First, judge the current environment: is there a main theme with everything else as secondary themes, or is it a rotation across multiple themes; or are we in a pullback phase mixed with chaos.
Only after you judge the environment correctly can you control your own strategy. For example, if there is a main theme, then trade the main theme. You can even ignore the secondary themes, because the main theme is the most continuously sustained kind of setup. If you can’t stick with the main theme, then it’s naturally even harder to master rotation in the secondary themes. If it’s a multi-theme rotation market, the strategy is to buy on dips based on the core identifiability of each theme, waiting for the rotation, not chasing price increases or selling in a panic. If it’s a pullback-and-chaos period, the best strategy is to stay in cash or run a light position for trial and error. Many people why they keep making mistakes comes down to not judging this first environment well: either they go aggressively in a pullback-and-chaos period, going all-in and eating drawdowns every day; or after there’s a main theme they don’t stick to it and instead go open a shop there.
This results in earning too little most of the time and losing too much.
2．Identify the main theme.
The main theme means a theme with staying power. Then how do you tell it will be sustained?
First of all, the beginning definitely has to go through a process: explosion—divergence—return of funds. Why are many setups one-day affairs or half-day affairs? Because after the explosion, on the next day the first batch faces divergence and even those in the front row get diverged out, so the back of the line naturally has no expectation of upgrades. Then there’s no waiting for a return of funds, so the theme lacks sustainability. Without sustainability, big money doesn’t get deeply involved. After these funds quickly withdraw, there’s no follow-up trading to keep the theme going, so it can’t become a main theme. To form a main theme, the most straightforward explanation is: let big money get involved thoroughly. Divergence happens first with some first-hand funds escaping, so the return of funds will naturally occur when the theme is attractive enough, and the back-hand funds step in—possibly even buying back the escaped funds.
So how do you participate in the main theme? First, since the main theme has staying power, the simplest way to participate is to play the capacity-and-core (the key large-cap) stocks.
For the limit-up chain (连板), once you reach a certain height, funds might rotate from high to low. Based on the recent market, limit-up chains basically top out around seven boards. Near the seven-board area, you should start considering a high-to-low rotation. But capacity-and-core stocks are tickers that big funds participate in. Even though you don’t get the same explosive returns as smaller cap limit-up plays, the upside sustainability is better.
So to participate in the main theme, either you buy on dips when the capacity-and-core and the sector are diverging together, or you buy on a consistent-limit-up (打板) after the limit-up ticker and the sector diverge and then move into alignment. After you identify the main theme, I can even custom-select only the stocks with clear identifiability within the main theme. You can ignore the secondary and hostile themes. Once the main theme clearly fades into a pullback, go flat and wait for the next opportunity.
3．If it’s a multi-theme rotation market, how do you play it?
Multi-theme rotation means adding the core identifiability of each theme to your watchlist, and usually it’s capacity stocks plus two, and limit-up tickers are grouped together by their height and put on the list. According to the auction indicators, judge the direction where funds are mainly attacking. Either participate immediately in the theme indicated by the auction. If you didn’t participate, then look for dip-buy opportunities with core identifiability after the themes that experienced divergence have continued through it.
Note here: the premise for dip-buying is that the theme has already had divergence, and then on the next day the divergence continues. That’s when you do a dip-buy core action. Don’t, when the theme’s divergence happens the first time, get impatient and rush to dip-buy. At that time, it’s more likely you buy and then find it hasn’t bottomed yet, so you have to endure the divergence.
So if you judge it’s a multi-theme rotation market, the steadiest approach is to wait for the theme(s) that have finished diverging and then continue to do dip-buy after divergence continuity. The more aggressive approach is to participate in the theme that might attack based on sector rotation and intraday sector moves seen in the auction.
For the former, the potential issue is that you didn’t catch the rotation correctly, so you keep waiting for the rotation. For the latter, the potential issue is that after you chase in, the rotation shifts to other themes. In general, the former is safer, while the latter combined with auction indicators has higher certainty—but if it fails, the waiting time for the rotation to unlock the position may be longer.
In summary, rotation markets are comparatively hard to trade. They require a very strong sense of the tape. If you can’t be sure, then take a伏击 (ambush) approach and wait for rotation. Only those with the capability can actively attack in a rotation market.
4．Look at the market’s highest board.
For limit-up traders, the复盘 (post-trade review) is mostly about looking at limit-up tickers—how many boards the highest stock reached, and whether sentiment is just starting up, moving toward a climax, or at a pullback “ice point.”
Generally speaking, just glance at the daily ladder of limit-up tiers: you’ll know which are high leaders, which are mid-tier, and which are potential nodes for high-to-low rotation.
For example, if the highest board just breaks limit-up (断板), then whether the market above the second board can be followed through depends on how the high leader breaks. If the high leader breaks and runs a天地板 (dramatic two-sided limit move), then on the next day when the auction opens, if it opens at a limit-down and has sell-side orders stacked (a firm sell order), then on that day, nothing above the second board is to be continued. All you can do is the first board and the one that goes from 1 to 2 (one进二).
If the day before the high leader broke its limit-up it closed red (红盘 close), and on the next day the auction opens either slightly low or flat or slightly high with a small premium, then in that kind of sentiment you can experiment with mid-tier “surviving through” (穿越).
The two scenarios above are stated in extreme terms to help everyone understand sentiment mechanics. If the high leader breaks with large negative feedback, then the mid-tier that comes up afterward must absorb a bigger sentiment shock; even if you’re wrong, you may end up with the same fate as the high leader. So if others don’t want to接力 (follow through) you, then you shouldn’t go either.
If there’s no negative feedback from the high leader, then if the following mid-tier just has to endure a bit of divergence and then sentiment warms back up, that’s where doing a “survival through to become the next high leader” has meaning.
So for limit-up traders, their post-trade review is mostly about reviewing sentiment and cycle. For example, if the “spotlight height” (明牌高度) is seven boards, and your plan for the next day is to follow through from five to six. Then your review is that it’s a failing grade if you just keep that plan to follow five into six. In other words, your review is that it’s not up to standard. On one hand, the probability of being wrong is high; on the other hand, even if you succeed, the available upside space is limited.
At the same time, doing limit-up follow-through can run counter to the sector and counter to sentiment, but you cannot detach from the sector or detach from sentiment. For the planned ticker, whether there’s high-position suppression above, and which tickers are the sector’s capacity-and-core—if some lagging tickers in the sector have drag, they might still be able to force a progression, but you can force it for a moment, you can’t force it forever. When the sector isn’t helping out (no sector tailwind), in the end it’s like a single tree standing alone and can’t support itself.
And if follow-through sentiment is bad, you can still harden your head and do it—but because certainty and tolerance for error are lower, the cost of trial and error becomes higher.
So limit-up follow-through might have the possibility of breaking away from the environment, but what we need to do is to ride the trend as much as possible. “Riding the trend” means it’s more likely to work. Going against the trend—when you zoom out and look—definitely means it’s less often right and more often wrong.
5．News/industry headlines.
Many teachers probably said that you shouldn’t look at news—news can mislead you. But what I want to say here is: when you复盘, you must combine it with the news/industry headlines. As more and more quantitative strategies participate, I can say responsibly that the impact of news on the market is getting larger. A large portion of quantitative text data comes from the news/industry headlines. So what you can see is that when good news comes out, tickers tied in bulk to the hot-speed/涨速榜 will have abnormal moves, and the strength of the good news is big—on that day, many limit-up stocks show up, and the next day there will be a batch of straight “one-word” (一字) orders.
Take the雅下 wave of the market as an example: if you didn’t take it seriously that day, then later it would be very difficult to participate in turnover-based trades, because the good ones will get supported by one-word limit orders, while turnover-based trades are uncertain and you can easily buy into stocks that get eliminated.
So news/industry headlines definitely need to be referenced. After the news comes out, depending on its strength, good stocks should hold overnight if they’re appropriate. If the order is too big to buy, cancel the order.
Another piece: for example, if the sector’s capacity-and-core issues bad news, then on the next day you definitely need to combine it with the news/industry headlines to judge the auction. If a stock has no bad news, then whether it opens flat, or slightly red, doesn’t it feel fairly normal? But if a stock has bad news and it can still open slightly red the next day, doesn’t that suddenly raise expectations a lot? Similarly, after good news is issued, if the next day the sector’s identifiability opens in bulk below expectation, then should you run in the auction?
But if there’s no good news, then on the next day, isn’t an opening generally acceptable again? So news/industry headlines determines expectations. If expectations are higher, low openings aren’t good; if expectations are lower, high openings create an expectation gap.