For investors seeking to steadily progress in the Hong Kong stock market, success doesn’t stem from precisely predicting every fluctuation of the market, but rather from establishing a scientific, rational, and strictly adhered-to investment system. This system’s core consists of three pillars: reasonable position control, intelligent rebalancing strategies, and unwavering trading discipline. This article will consolidate these key elements to provide investors with a comprehensive and detailed operational guide.

Position Control – The Cornerstone of Resilient Investing

The primary goal of resilient investing is “to preserve capital and develop afterwards.” Position control serves as the “shield” to achieve this, determining your ability to withstand market volatility.

Overall Allocation: Dependent on Risk Tolerance and Market Temperature

• Personal Risk Tolerance: This is the fundamental determinant of your allocation ceiling. Risk-averse investors should maintain a total position no higher than 60%, even in bull markets. Investors with slightly higher risk tolerance can set their ceilings at 70%-80%. At all times, maintain at least 20% cash as a strategic reserve to capitalize on extreme opportunities or unforeseen needs.

• Market Temperature:

  • High/Bubble Phase (Market Mania): Allocation should be reduced to 30%-50% or lower. Preserving profits is the priority.
  • Neutral/Choppy Phase (Uncertain Direction): Allocation can remain at 50%-70%, making structural adjustments.
  • Low/Panic Phase (Valuation Bottoming): This is the golden time to increase allocation, potentially reaching 70%-80% or higher.

Individual Stock and Industry Exposure: Diversify Risk, Avoid Overconcentration

• Maximum Single Stock Position: Regardless of how optimistic you are about a particular stock, the recommended position size for any single stock should not exceed 20% of the total investment portfolio. For companies with limited understanding or higher risk profiles, the position size should be further reduced to 5%-10%.
• Maximum Single Industry Exposure: Given the high concentration of industries in Hong Kong (such as finance and technology), it’s important to diversify. The total exposure to any single industry should not exceed 30%-40% to mitigate the impact of industry-specific “black swan” events.

Buyback Strategy – The Art of Transforming Passivity into Proactivity

A buyback strategy is the “lever” for prudent investors to accumulate high-quality positions in a declining market. However, this requires only operating on companies with sound fundamentals and uncompromised core competitiveness. For companies with deteriorating fundamentals or “penny stocks,” the only correct action is to cut losses.

How much to buy on dips for adding to position?

The core of accumulating during a decline is “buying lower,” but this must be executed with a plan and discipline.

• Pyramidal Accumulation Strategy (Wide Base, Narrow Top): This is a relatively conservative approach where the amount purchased increases as the price falls further.
  • Initial Position Building: Establish a base position within a reasonable valuation range.
  • First Refill: When the price drops 15%-20% from the initial position building price. This is a common re-entry point, filtering out normal market fluctuations.
  • Second Refill: When the price drops another 15%-20% from the first refill price (cumulative decline of approximately 30%-40%).
  • Third Refill: When the price drops another 15%-20% from the second refill price (cumulative decline potentially reaching around 50%). At this point, it’s typically extreme panic. If the company’s fundamentals remain solid, it’s a great buying opportunity.

Is it reasonable to add to the position a few times?

To avoid overinvesting capital in a wrong decision, the number of times to add to the position should not be excessive.

• Recommended number of additions: 2-3 times is appropriate.
  • Risk control: If the stock price still doesn’t improve after 2-3 major add-on purchases, you must re-examine your initial investment logic. Unlimited adding may lead to a single holding ratio being too high, dragging down the entire investment portfolio.
  • Maintain cash reserves: Excessive additions will quickly deplete available funds, causing you to miss other better opportunities that appear in the market.

Trading Discipline – The Core for Newbies’ Progression

If position sizing and stop-lossing are “techniques,” then trading discipline is the “way.” For novice traders, adhering to discipline is a decisive factor in whether they can survive in the market long-term.

Planning and Execution Discipline: Never Go into Battle Without a Plan

• Plan Before Trade: Every trade must be preceded by a clear understanding of the buy rationale, target price (take profit), and stop-loss level. During the trade, strictly adhere to the plan and avoid emotional interference.
• Avoid Riding the Wave and Panic Selling: Overcome the fear of missing out (FOMO) and panic selling emotions. Only execute trades at points that align with your plan.

Risk and Capital Management Discipline: Survival is the Priority

• Strict Stop-Loss, No Hesitation: A stop-loss is the lifeline for protecting your capital. The most dangerous habit for beginners is to hold onto losing trades. Set your stop-loss levels at -5% to -10%, and execute without hesitation upon reaching them.
• Don’t Add to Losing Trades to Average Down to Cost Basis: This is a fatal error. If a trade proves to be wrong (falling below the stop-loss), the correct approach is to exit, not to invest more money to “dilute the cost.” This can turn a small mistake into a major disaster.

Mindset and Emotional Control Discipline: Be the Master of Your Emotions

• Accept Losses as Part of Trading: No one can win every battle. View small losses as a necessary cost of trading, focusing on the long-term overall profit/loss ratio.
• Don’t Get Greedy from Profits, Don’t Be Bitter from Losses: Break free from a “gambling mentality,” don’t take risks due to profits, and don’t retaliate with impulsive trades due to losses. Maintain a calm mindset and remain consistent.

Learning and Review Discipline: Continuous Evolution

• Maintain a Trading Journal: Detailed record of your thought process and results for each trade, with regular reviews to analyze successes and failures. This is the most effective way to self-improve.
• Stick to Your Circle of Competence: Only invest in areas you understand and can truly comprehend. Avoid unfamiliar fields and complex financial products.

Patience and Discipline are Superior to Everything Else

As a prudent Hong Kong stock investor, your goal isn’t to be a speculator dancing on the crest of market waves, but rather to be like a discerning general, orchestrating strategy from behind the scenes. Please treat position control as your steadfast shield, opportunistic buying strategies as your sharp spear, and trading discipline as an immutable military code.

In the initial stages of trading, prioritize “minimizing losses” over “making big profits.” Through continuous learning, practice, and review, you will ultimately achieve long-term, steady wealth appreciation in this market brimming with opportunities and challenges. Remember, patience and discipline are always more important qualities than predicting the market.