Based on Qiang Qiang (将强), Stock Investing Trilogy (股票投资三部曲) (2021)
The Stock Investing Trilogy presents a unified methodology for individual investors operating in China's A-share market. The author, Qiang Qiang (将强), synthesizes Western investment theory — value investing principles from Graham, Buffett, and Fisher, alongside technical analysis traditions — with practical adaptations required by the structural realities of Chinese equity markets.
The trilogy is organized into three interdependent parts:
Part 1: FUNDAMENTAL ANALYSIS — What to buy: identify high-quality companies with durable
competitive advantages, strong financials, and reasonable valuations.
Part 2: TECHNICAL ANALYSIS — When to buy: use price, volume, and trend tools to time entries
and avoid catching falling knives.
Part 3: PORTFOLIO MANAGEMENT — How to buy (and sell): construct a diversified portfolio, size
positions, manage risk, and maintain discipline through market cycles.
The core thesis is that neither fundamental analysis alone nor technical analysis alone is sufficient for the Chinese A-share market. Fundamentals answer what to own; technicals answer when to act; portfolio management answers how much and how long. All three legs must be present for consistent long-term returns.
The Chinese A-share market differs from developed Western markets in several structural ways that directly impact investment methodology:
These structural differences mean that a pure Buffett-style "buy and hold forever" approach or a pure Western technical trading system will both underperform a methodology specifically calibrated to A-share realities. The trilogy provides that calibration.
The author repeatedly emphasizes that the most dangerous investor is the one who knows only one tool. A pure fundamental investor will buy a cheap stock that keeps getting cheaper for years. A pure technician will buy a chart breakout in a company with fraudulent financials.
The solution is a sequential filter:
Step 1: Fundamental screen → Creates a "stock pool" of investable companies
Step 2: Technical timing → Identifies which stocks in the pool have favorable entry setups
Step 3: Portfolio rules → Determines position size, entry execution, and ongoing management
Fundamentals serve as the necessary condition; technicals serve as the sufficient condition; portfolio management serves as the survival condition.
The foundation of fundamental analysis is the ability to read and interpret the three core financial statements. The author provides a practical framework for non-accountant investors to extract actionable information.
The income statement reveals whether a company is growing profitably. Key items to examine:
| Line Item | What to Look For | Red Flag |
|---|---|---|
| Revenue (营业收入) | Consistent YoY growth > 15% | Revenue declining while earnings rise (cost cutting, not growth) |
| Gross Profit Margin (毛利率) | Stable or expanding over 3+ years | Declining margins suggest pricing power erosion |
| Operating Profit (营业利润) | Growing faster than revenue (operating leverage) | Large gap between operating and net profit (one-time items) |
| Net Profit (净利润) | Growth > 20% YoY for growth stocks | Volatile, unpredictable earnings |
| Non-recurring Items (非经常性损益) | Small relative to total profit | Non-recurring items > 30% of net profit |
The author stresses examining deducted non-recurring net profit (扣非净利润) rather than headline net profit. Many A-share companies inflate earnings through one-time asset sales, government subsidies, or investment gains that mask weak core operations.
The balance sheet reveals financial health and capital structure:
The cash flow statement is the hardest to manipulate and therefore the most reliable:
The "golden combination" for financial statements:
Revenue growth > 15% YoY sustained
Net margin > industry average, stable or improving
Operating cash flow > net profit (cash conversion ratio > 1.0)
Free cash flow > 0 consistently
Debt-to-equity < 60% (non-financial)
ROE > 15% sustained
ROE is the single most important metric in the author's framework. It measures how effectively management converts shareholder equity into profit.
ROE = Net Margin x Asset Turnover x Financial Leverage
= (净利润/营收) x (营收/总资产) x (总资产/净资产)
The author warns against companies where ROE spikes due to a single year of high leverage or asset disposal. Sustainable ROE from recurring operations is the target.
Revenue growth is the fundamental engine. Companies with accelerating revenue growth (e.g., 15% -> 20% -> 28%) are in the early-to-mid stages of a growth cycle and command premium valuations. Decelerating revenue growth (e.g., 30% -> 22% -> 14%) often precedes stock price declines even if absolute growth is still positive.
Margin stability over multiple years reveals pricing power. Expanding margins combined with growing revenue is the strongest signal. Contracting margins despite growing revenue indicates commoditization or rising input costs eroding competitive advantage.
Free cash flow is the ultimate test of business quality. A company reporting high earnings but negative free cash flow for multiple years is either capital-intensive by nature (acceptable if the capex generates future returns) or has low-quality earnings (unacceptable). The author recommends computing cumulative free cash flow over a 5-year window and comparing it to cumulative net profit. A ratio below 0.6 warrants skepticism.
The author adapts Porter's industry life cycle to the A-share context:
Apply the five forces with Chinese market nuances:
The author adapts Morningstar's moat framework to Chinese equities:
| Moat Type | Description | A-Share Examples |
|---|---|---|
| Brand (品牌) | Consumer willingness to pay a premium | Kweichow Moutai (茅台), Haitian Soy Sauce (海天味业) |
| Cost Advantage (成本优势) | Structural cost leadership | Hengli Petrochemical (恒力石化), large-scale chemical producers |
| Network Effects (网络效应) | Value increases with each additional user | Tencent (腾讯) via WeChat ecosystem |
| Switching Costs (转换成本) | High cost for customers to switch | Yonyou (用友) enterprise software, financial data terminals |
| Efficient Scale (有效规模) | Natural monopoly in niche markets | Regional port operators, toll road concessions |
The strongest investments combine two or more moat sources. A single-moat company (especially cost advantage alone) is more vulnerable to disruption than a multi-moat company.
Evaluating management in A-share companies requires attention to:
The author's preferred moving average system for A-shares:
Short-term: MA10, MA20 — Capture near-term trend direction
Medium-term: MA50, MA60 — Define intermediate trend
Long-term: MA120, MA250 — Define primary trend (半年线, 年线)
Bullish alignment (多头排列): MA10 > MA20 > MA50 > MA120 > MA250, all sloping upward. This is the only configuration in which new long positions should be initiated.
Bearish alignment (空头排列): The inverse. No new buys. Existing positions should be reduced or eliminated.
The MA250 (annual line, 年线) holds special cultural significance in the A-share market. Many Chinese retail investors treat it as a bull/bear dividing line. Because so many participants watch it, it becomes a self-fulfilling support/resistance level — a reflexivity effect the author encourages exploiting rather than dismissing.
Key support/resistance levels in the A-share context:
Volume analysis is especially important in A-shares because of the retail-dominated market structure. Retail investors tend to create volume signatures that are more readable than in institutional-dominated markets.
Key volume-price relationships:
Price up + Volume up = Healthy advance, continuation likely (量价齐升)
Price up + Volume down = Divergence, advance weakening (量价背离)
Price down + Volume up = Capitulation or distribution (放量下跌)
Price down + Volume down = Orderly pullback, potential support (缩量回调)
Volume at key levels:
Shrinkage floor (地量见地价): Extremely low volume after a sustained decline often marks a bottom. The author looks for volume < 30% of the 60-day average volume as a potential exhaustion signal. This must be combined with other indicators — low volume alone is necessary but not sufficient.
The author's preferred entry timing approach combines multiple technical elements:
1. Primary trend must be bullish (MA alignment, weekly chart uptrend)
2. Stock is pulling back to a defined support zone (MA20/MA60, trendline, or platform support)
3. Volume contracts during the pullback (缩量回调)
4. A bullish reversal candle appears at support (hammer, engulfing, morning star)
5. Volume expands on the reversal candle or the following session
This "pullback in an uptrend" (上升趋势中的回调) is the highest-probability entry pattern. It combines trend-following (buying in the direction of the primary trend) with mean-reversion (entering during a temporary pullback) — capturing the best of both approaches.
The sequential integration process:
Fundamental filter → Creates a "white list" of 30-50 quality stocks
↓
Technical scan → Identifies which white-list stocks have active entry setups (typically 3-8)
↓
Entry execution → Initiates positions in the 1-3 best setups with proper sizing
Fundamental analysis changes slowly — a company's quality typically evolves over quarters and years. Technical analysis changes daily. By maintaining a pre-screened fundamental white list and scanning it daily for technical setups, the investor avoids the two common traps:
The complete stock selection process synthesizes Parts 1 and 2:
Stage 1: Fundamental Screen (Quarterly)
Filter 1: ROE > 15% for at least 3 consecutive years
Filter 2: Revenue growth > 10% YoY
Filter 3: Deducted non-recurring net profit growth > 15% YoY
Filter 4: Operating cash flow / Net profit > 0.8 (3-year average)
Filter 5: Debt-to-equity ratio < 60% (non-financial companies)
Filter 6: Identifiable competitive moat (qualitative assessment)
Filter 7: Reasonable valuation (PE < industry median x 1.5, or PEG < 1.5)
This screen typically yields 30-80 companies from the ~5,000 listed on A-share markets.
Stage 2: Technical Timing (Daily/Weekly)
Filter 8: Stock price above MA120 and MA250
Filter 9: Moving averages in bullish alignment or transitioning to bullish alignment
Filter 10: Stock pulling back to support (MA20/MA60, platform support, or trendline)
Filter 11: Volume contracting during pullback
Filter 12: Bullish reversal signal appearing (candle pattern, volume expansion)
This narrows the field to 3-8 actionable candidates at any given time.
Stage 3: Final Selection
From the remaining candidates, prioritize:
The author advocates a structured position sizing framework:
Total portfolio: 100% of investable capital
Maximum single position: 20% of portfolio at cost basis
Initial position size: 5-10% of portfolio
Add-on position size: 5% per addition, only if price confirms (moves in your favor)
Maximum positions: 8-12 stocks
Minimum positions: 5 stocks (below 5, concentration risk is excessive)
Cash reserve: Maintain 10-20% cash in uncertain markets
Position sizing is also risk-adjusted:
Position size = (Portfolio risk per trade) / (Entry price - Stop-loss price)
= (1-2% of portfolio) / (% distance to stop)
For a stock with a stop-loss 8% below entry:
Position size = 2% / 8% = 25% maximum
But since the single-position cap is 20%, the actual allocation is 20%. This ensures that no single loss can exceed 2% of the portfolio.
The author recommends diversification along three dimensions:
Avoid the common A-share mistake of "diversifying" into 20+ stocks across the same sector or theme — that is concentration masquerading as diversification.
Clear, executable buy rules:
Rule B1: Only buy stocks that pass both the fundamental screen AND technical timing filters.
Rule B2: Enter with an initial position of 5-10%. Do not go "all-in" immediately.
Rule B3: Place the buy order within 3% of the identified entry price. Do not chase.
Rule B4: If the stock gaps up > 5% above your planned entry, skip it. Wait for a pullback.
Rule B5: Initiate only 1-2 new positions per week maximum. Avoid buying spree behavior.
Rule B6: Do not buy during the first 30 minutes of trading (opening volatility is noise).
Rule B7: Prefer buying on a pullback day (red candle / down day in an uptrend) rather than
chasing a rally day.
Adding to positions (加仓规则):
Rule BA1: Only add to a winning position. Never average down on a losing position.
Rule BA2: First addition: after the stock advances 5-10% above initial entry and holds above
the breakout level for at least 3 trading days.
Rule BA3: Second addition: after the stock establishes a new support level at a higher price.
Rule BA4: Each addition should be equal to or smaller than the previous (pyramid up).
Rule BA5: Total position in any single stock must not exceed 20% of portfolio.
The sell rules are divided into offensive (profit-taking) and defensive (stop-loss) categories:
Offensive Sell Rules (止盈):
Rule S1: Sell 1/3 of the position when the stock reaches a 30% gain from entry.
Rule S2: Sell another 1/3 when the stock breaks below its MA20 after an extended advance.
Rule S3: Sell the final 1/3 when the stock breaks below its MA60 on elevated volume.
Rule S4: If the stock achieves a 100%+ gain, trail a stop using the MA50 on the weekly chart.
Rule S5: Sell if PE exceeds the 90th percentile of the stock's 5-year historical PE range.
Defensive Sell Rules (止损):
Rule D1: Hard stop-loss at 8% below entry price. No exceptions.
Rule D2: If the stock fails to advance within 20 trading days of entry, re-evaluate. If
no progress in 30 days, sell to redeploy capital (time stop).
Rule D3: Sell immediately on any evidence of financial fraud or accounting irregularities.
Rule D4: Sell if a quarterly report shows fundamental deterioration (ROE < 10%, negative
operating cash flow, revenue decline).
Rule D5: Sell if the stock falls below the MA250 and closes below it for 3 consecutive days.
Weekly review checklist:
Quarterly review checklist:
Annual review checklist:
The T+1 rule means that shares bought today cannot be sold until the next trading day. Implications:
The daily price limit creates unique dynamics:
Understanding retail behavior creates an edge:
China's equity market is deeply influenced by government policy:
The author identifies a typical A-share bull market sector rotation sequence:
Phase 1: Financials and real estate (政策底 → market bottom, liquidity-driven)
Phase 2: Infrastructure and materials (stimulus flows into fixed asset investment)
Phase 3: Technology and growth (risk appetite expands, valuation multiples expand)
Phase 4: Consumer and healthcare (late-cycle defensive rotation)
Phase 5: Small-cap speculation (final blow-off phase, market top approaches)
Understanding where the current market sits in this rotation cycle helps with sector allocation and risk management. Phase 5 is the signal to begin reducing overall equity exposure.
Consolidated entry rules from the trilogy:
ENTRY RULE 1 (Fundamental gate):
The stock must appear on the fundamental white list (passes all 7 fundamental filters).
No exceptions. Do not buy a stock that "looks good on the chart" but has not been vetted.
ENTRY RULE 2 (Trend gate):
The stock's MA120 must be sloping upward. The stock price must be above the MA120.
If the stock is below the MA120, it is not in a primary uptrend — do not buy.
ENTRY RULE 3 (Pullback gate):
The stock must be pulling back to a defined support level: MA20, MA60, rising trendline,
or the base of a consolidation platform. Do not buy breakouts to new highs without a
prior consolidation period of at least 3 weeks.
ENTRY RULE 4 (Volume gate):
Volume during the pullback must be below the 20-day average volume. A pullback on heavy
volume suggests distribution, not a healthy retracement.
ENTRY RULE 5 (Reversal signal gate):
A bullish candlestick pattern or a volume expansion day (> 1.5x 20-day average) must
appear at the support level. This confirms that buyers are stepping in.
ENTRY RULE 6 (Market environment gate):
The broader market index (Shanghai Composite or CSI 300) should not be in a confirmed
downtrend. If the index is below its MA120 and the MA120 is declining, reduce position
sizes by 50% or stand aside entirely.
ENTRY RULE 7 (Execution):
Enter within 3% of the planned entry price. Set the stop-loss immediately upon entry.
Record the entry rationale, price, stop-loss level, and target in the trading journal.
Consolidated exit framework:
STOP-LOSS RULE 1 (Hard stop):
Maximum loss of 8% from entry price. Triggered automatically — no analysis, no hoping,
no averaging down. The 8% level is chosen because it limits damage while allowing for
normal A-share volatility (which is higher than US market volatility).
STOP-LOSS RULE 2 (Moving average stop):
If the stock closes below the MA60 for 3 consecutive days on rising volume, exit the
full position regardless of the percentage loss or gain.
STOP-LOSS RULE 3 (Time stop):
If the stock has not advanced at least 5% within 30 trading days of entry, sell the
position. Dead money has an opportunity cost.
STOP-LOSS RULE 4 (Fundamental stop):
Exit immediately if quarterly results reveal:
- Revenue decline YoY
- Net profit decline > 20% YoY
- Operating cash flow turns negative
- Major management change or accounting restatement
PROFIT-TAKING RULE 1 (Scaled exit):
Sell in thirds: first third at +30%, second third on MA20 break, final third on MA60
break. This captures the majority of the move while locking in partial profits early.
PROFIT-TAKING RULE 2 (Trailing stop):
For positions with gains > 50%, trail the stop at the MA50 on the weekly chart. This
allows the position to run as long as the weekly trend remains intact.
PROFIT-TAKING RULE 3 (Valuation exit):
If the stock's PE exceeds 2x its 5-year average PE, begin scaling out regardless of
technical signals. Extreme overvaluation eventually corrects.
PROFIT-TAKING RULE 4 (Euphoria exit):
If you see the stock recommended on mainstream social media by people who do not normally
discuss stocks, sell at least half. Universal enthusiasm is a reliable top indicator.
RISK RULE 1: No single position > 20% of portfolio at cost.
RISK RULE 2: No single sector > 30% of portfolio.
RISK RULE 3: Maximum portfolio drawdown tolerance = 15%. If the portfolio draws down 15%
from its peak, reduce all positions to 50% and reassess.
RISK RULE 4: Maximum total risk exposure = 6% of portfolio at any time.
(If each position risks 2% to its stop, hold no more than 3 full positions
simultaneously when starting new entries.)
RISK RULE 5: Maintain 10-20% cash reserve at all times in normal markets. Increase to
30-50% cash in late-cycle or uncertain environments.
RISK RULE 6: Do not use margin/leverage unless the portfolio has demonstrated consistent
profitability for at least 2 years.
RISK RULE 7: Avoid concentrated exposure to any single policy risk theme.
The author warns that A-share stocks are more correlated than US stocks, especially during market selloffs. In a broad market decline, nearly all stocks fall together regardless of individual fundamentals. This makes broad market assessment (Entry Rule 6) essential — when the market turns, diversification across sectors provides less protection than in less correlated markets. The primary defense is cash position and reduced exposure.
Unforeseeable events — regulatory shocks, geopolitical crises, pandemics — cannot be predicted but can be survived through preparation:
Every trade must be documented:
Date: [Entry date]
Stock: [Code and name]
Entry Price: [Price]
Position Size: [% of portfolio]
Stop-Loss: [Price and % from entry]
Target: [Price and % from entry]
Fundamental Thesis: [1-2 sentences]
Technical Setup: [Description of the pattern/signal]
Entry Quality: [Grade A/B/C after the fact]
Exit Date: [When closed]
Exit Price: [Price]
P&L: [% and absolute]
Lessons: [What was learned]
DISCIPLINE RULE 1: Follow the system. If the rules say sell, sell. If the rules say wait,
wait. Overriding the system requires a written justification BEFORE the
trade, not a rationalization after.
DISCIPLINE RULE 2: Do not check prices more than 3 times per day. Constant price-watching
induces emotional decision-making.
DISCIPLINE RULE 3: Never act on tips from friends, social media, or chat groups. Every
potential investment must go through the full fundamental and technical
screening process.
DISCIPLINE RULE 4: After a losing trade, wait at least 2 trading days before entering a
new position. This cooling-off period prevents revenge trading.
DISCIPLINE RULE 5: After 3 consecutive losses, reduce position sizes by 50% until a
winning trade restores confidence and confirms the system is working.
DISCIPLINE RULE 6: Review the trading journal weekly. Identify pattern errors (e.g.,
consistently entering too early, holding losers too long) and create
specific corrective rules.
DISCIPLINE RULE 7: Do not discuss individual stock picks on social media or forums.
Public commitment to a position creates psychological anchoring that
makes it harder to sell when the system signals exit.
DISCIPLINE RULE 8: Take at least one full week off from the market every quarter.
Continuous engagement breeds overtrading.
| Mistake | Why It Happens | Correction |
|---|---|---|
| Buying based on low PE alone | Stocks are cheap for a reason — earnings may be peaking | Combine PE with growth trajectory; require ROE > 15% |
| Ignoring cash flow | Reported earnings can be manipulated; cash flow cannot | Always verify operating CF > net profit |
| Falling for "story stocks" | Exciting narrative without earnings | Require at least 2 years of proven profitability |
| Chasing hot sectors | FOMO after a sector has already rallied 50%+ | Only enter sectors still in Phase 1-2 of rotation |
| Trusting management blindly | Confirmation bias after initial research | Verify claims against financial data each quarter |
| Mistake | Why It Happens | Correction |
|---|---|---|
| Buying breakouts without volume | Want to "catch the move early" | Require volume > 1.5x average on breakout days |
| Ignoring the broader market | Focusing on individual stock in isolation | Always check market environment gate (Entry Rule 6) |
| Changing timeframes to fit narrative | Daily chart says sell; switch to weekly to justify holding | Pick a primary timeframe and stick to it |
| Overcomplicating with indicators | Adding MACD, RSI, KDJ, Bollinger simultaneously creates conflicting signals | Use price, volume, and moving averages as the core; everything else is secondary |
| Trading against the trend | Trying to catch bottoms in downtrends | Only buy stocks in Stage 2 uptrends, above MA120 |
| Mistake | Why It Happens | Correction |
|---|---|---|
| Overconcentration | Conviction bias — "I know this one will work" | Hard cap at 20% per position, enforced with no exceptions |
| Overdiversification | Fear of missing out on multiple opportunities | Cap at 12 positions; quality over quantity |
| No stop-losses | Emotional attachment; "it will come back" | Pre-set stops at entry; treat 8% as a hard rule |
| Averaging down | Trying to lower cost basis | Only add to winners; never to losers |
| Revenge trading | Emotional response to loss | 2-day cooling-off period after every losing trade |
Phase 1: Fundamental Discovery (Quarterly Screen)
Company: XYZ Foods (xyz食品), a leading condiment manufacturer
ROE: 22%, 24%, 25% (last 3 years) — PASS (> 15%)
Revenue growth: 18%, 22%, 25% — PASS (accelerating, > 10%)
Net profit growth: 20%, 28%, 32% — PASS (> 15%, deducted non-recurring)
Operating CF / Net profit: 1.1, 1.2, 1.05 — PASS (> 0.8)
Debt-to-equity: 35% — PASS (< 60%)
Moat: Brand + distribution network (dual moat) — PASS
Valuation: PE 28, PEG 0.9 (growth rate 32%) — PASS (PEG < 1.5)
Result: Added to fundamental white list.
Phase 2: Technical Timing (Daily Monitoring)
Week 1-4: Stock is in uptrend but recently broke above resistance. No pullback yet. WAIT.
Week 5-6: Stock pulls back from 52.8 to 47.5 (10% decline). Volume contracts to 60% of
20-day average during pullback. MA60 is at 46.0 and rising. WATCHING.
Week 7: Stock touches 47.0 (near MA60 at 46.5). A hammer candlestick appears on day 3.
Volume on the hammer is 0.8x average — still below average. ALMOST.
Week 7, Day 4: Stock opens above the hammer high at 48.2. Volume expands to 1.6x average
by midday. All entry gates are satisfied.
ENTRY: Buy at 48.5. Initial position = 10% of portfolio.
STOP: 44.6 (8% below entry).
TARGET 1: 63.0 (30% above entry).
Phase 3: Position Management
Week 8-10: Stock advances to 52.0. Now 7.2% above entry. Holds above breakout level for
5 days. ADD: Second tranche of 5% at 52.0. Average cost now 49.7.
Raise stop to 48.0 (break-even on initial tranche).
Week 11-16: Stock consolidates between 51-54 for 4 weeks. Volume remains average. HOLD.
Week 17-20: Stock breaks out of consolidation to 58, then 62. Volume expands. HOLD.
Week 21: Stock hits 63.0 — first target. SELL 1/3 of position at 63.0.
Lock in +30% on initial tranche. Trail stop on remainder using MA20 (now at 58).
Week 22-28: Stock continues to 71.5. MA20 climbs to 66.
Week 29: Stock reverses, closes below MA20 at 64.5. Volume expands to 2x average on the
decline day. SELL second 1/3 at 64.5.
Week 30-35: Stock stabilizes around 62-66. MA60 climbs to 60.
Week 36: Stock breaks below MA60 at 60, closing at 58.5 on heavy volume.
SELL final 1/3 at 58.5.
Phase 4: Post-Trade Review
Entry: 48.5 (10%) + 52.0 (5%) = Average cost 49.7
Sells: 63.0, 64.5, 58.5
Weighted P&L: +31.4% (blended across all tranches)
Time held: 36 weeks (9 months)
Grade: A — Followed the system. Entered on pullback with confirmation. Scaled out
per rules. Did not let the reversal erase all gains.
Lesson: The MA20 sell signal on the second third was well-timed. The final third
could have been sold earlier on the MA20 break as well, but the rules called
for MA60 for the last tranche. Acceptable — system adherence matters more
than optimization.
"Fundamentals tell you what to buy. Technicals tell you when to buy. Portfolio management tells you whether you survive long enough to benefit from being right." -- Core thesis of the trilogy
"In the A-share market, the biggest enemy is not the market maker or the institution — it is your own inability to sell a losing position." -- On the importance of stop-losses
"ROE is the single number that separates great companies from mediocre ones. A company that sustains 20%+ ROE for a decade is almost certainly doing something its competitors cannot easily replicate." -- On the primacy of ROE
"A stock that passes every fundamental test but is in a downtrend is a stock that will test your patience, then your conviction, then your capital." -- On the necessity of technical timing
"The amateur adds to losers because he wants to be right. The professional adds to winners because he wants to make money." -- On averaging down vs. pyramiding up
"Diversification is not owning 20 stocks. Diversification is owning 8 stocks that would not all decline for the same reason." -- On meaningful diversification
"The daily price limit is both a blessing and a curse: it slows the panic, but it also traps the unprepared. Position sizing is the only real protection." -- On A-share price limits and position management
"When the People's Daily says the market is healthy, sell. When your taxi driver says stocks are finished, buy." -- On contrarian sentiment indicators in China
"The market does not reward intelligence. It rewards discipline. The investor who follows a mediocre system with perfect discipline will outperform the genius who follows a brilliant system when it suits him." -- On the primacy of discipline over intellect
"Free cash flow is the lie detector of financial statements. Earnings can be manufactured; cash cannot." -- On cash flow as the ultimate quality metric
"Every stock you own should be a stock you would buy today at today's price. If it is not, you are holding out of hope, not conviction." -- On honest portfolio assessment
"The three deadliest words in the A-share market are: 'This time different.' The cycle always returns. The only question is whether you have capital remaining when it does." -- On market cycles and capital preservation