Mastering Market Trends: Navigating Trading Pitfalls and Enhancing Quantitative Strategies

Hello, everyone!  

It’s a pleasure to meet you all at Diamond Ridge Financial Academy as we explore cutting-edge investment strategies together.  

Let’s harness the power of quantitative trading and embark on a journey toward effortless and profitable investing!

Last night, we reviewed last week’s markets and trading, covering global equities, forex, gold and crypto markets. Overall, the week showed market volatility, but the tech sector remained strong with emerging technologies like AI continuing to attract attention.

We also shared specific trading strategies and fully leveraged Chief Analyst Hanover’s “Price Trend Theory.” With the help of the 21-day moving average, we managed to achieve solid profits while also introducing everyone to the basic principles of quantitative trading systems.

The market’s performance and successful profits last week further highlight the investment opportunities brought about by the tech revolution. We encourage you to seize this era’s wealth opportunities and believe that mastering the right investment strategies can help achieve long-term financial growth.

Making a profit in investing isn’t as hard as it seems. The key lies in finding the right direction. First, we need to learn to summarize and avoid common loss-making practices, such as chasing highs and selling lows, overtrading, emotional trading and failing to set stop losses. These mistakes are like stumbling blocks on the investment path. Only by avoiding them can we move forward steadily.

Next, we must study profitable patterns and find the investment methods that suit us. For instance, you can choose to invest in assets aligned with the growth of the tech industry as this sector represents the future and offers long-term, stable returns. Alternatively, you could focus on stocks breaking trends as they often have greater growth potential and can deliver higher returns. Of course, using quantitative trading systems is another great option as it allows for more objective and rational investment decisions, improving success rates.

This week, we’ll focus on learning how to avoid common investment mistakes and identify strategies that work for you. Our goal is to help everyone better understand the benefits of quantitative trading systems, prepare for the launch of version 5.0 next month and embrace the company’s quantitative fund products.

Tonight, we’ll start by studying price patterns and using the 21-day moving average to identify reasonable buying points. Before we begin, let’s quickly review this week’s market situation.

The week started poorly. Today, the UK stock market showed weakness with the FTSE 100 Index falling 0.46%. While trading tends to slow down as Christmas approaches, key data like UK inflation figures, US GDP data and rate forecasts on both sides of the Atlantic are stirring market uncertainty.

For example, the latest UK Purchasing Managers’ Index (PMI) released today showed the largest drop in employee numbers since Jan 2021, with UK companies laying off staff at the fastest rate since the COVID outbreak. Following this data release, the FTSE 100 Index fell more than 40 points from its intraday high.

The reason is that the PMI data indicates signs of slower UK economic growth, fueling concerns about the country’s economic outlook. The accelerated pace of layoffs shows a lack of business confidence in the future economy, reducing investment willingness and dragging down stock market performance.

In addition, the market remains cautious about the upcoming UK inflation data and rate forecasts. Higher-than-expected inflation could force the Bank of England to slow rate cuts further, putting more pressure on economic growth. As for rate forecasts, there is still uncertainty over whether the Bank of England will follow the Federal Reserve in easing rate hikes, adding to market instability.

At the end of the year, despite weaker-than-expected economic data and escalating tensions in the Middle East creating heavy selling pressure in the stock market, this hasn’t stopped us from making profits in our trades.  

For instance, the UK tech stock Rolls-Royce we previously traded has defied the market downturn and continued to rise. This is due to its leading position in aerospace manufacturing and AI, along with the company’s active transformation strategies.  

Similarly, Tesla, even after I suggested taking profits, has continued to hit new highs driven by the tech boom. This shows that the strong performance of the tech sector and optimism about future technological trends remain key forces driving the stock market.

Additionally, two stocks we currently hold have performed well today. Among them, TeraWulf (WULF), a digital asset technology company, has attracted significant market interest. Although it faced volatile swings recently due to some negative news in the AI industry, it has rebounded as BTC hit a new all-time high yesterday, driving gains across the digital asset sector. Today, WULF lived up to expectations, surging over 10% intraday.  

This stock is influenced by both AI and the digital economy, which makes its price more volatile. For stable returns, you can trade short-term within its range. Its current support level is around $6.65. Technically, as long as it doesn’t break below this level, it has the potential to rebound. The first resistance target is $8.15, with the second near $9.2. For short-term trades, you can take profits around the first target or adjust your position based on intraday fluctuations.

For those who prefer more stable trades, Trump Media & Technology Group (DJT) is a great focus. Since our recommendation on Nov 29, its price has been steadily climbing. The initial recommendation price was $30. We advised trimming positions during peaks and adding on pullbacks. Following our strategy, this stock has already delivered over 25% gains. The next target is $39.5, with a second reference target at $49.5.

DJT has many strengths. Backed by Trump’s strong political influence, it has a significant edge in political news and information dissemination. It combines features of social media, news platforms and tech companies, creating a unique business model that attracts a large user base and investors.

Moreover, DJT benefits from market interest in specific themes like political news and social media, which are currently very popular. It could also gain short-term boosts from policy-related news, such as Trump’s political activities or policy changes.  

DJT’s profitability is also solid, driven by its growing user base that provides a stable revenue stream. It also benefits from rising ad income and paid content, which contribute significantly to its profits.  

So, DJT has strong growth potential and offers a high safety margin in the current market, making it a good choice for investors seeking stable returns.  

In summary, whether you’re trading short-term or pursuing steady gains with swing trades, our strategies supported by quantitative trading systems help ensure profits.

Talking about this, I remember a recent question from some students about success rate and profit expectations. Some believe that the success rate of trades determines the profits, while others think that no matter the success rate, as long as there’s stable profit, it’s a good investment. So how exactly should we measure whether a trade is successful?

Actually, success rate and profit expectations are just two important indicators of a trade’s success, but they’re not everything. A successful trade requires consideration of the following aspects:

Profitability: Profitability measures the return on investment and reflects the actual profit level of the trade.  

Risk control: Risk control is key to successful investing. It helps us avoid risks and prevent major losses.  

Trading strategy: A trading strategy is the foundation of successful investing. It determines how we make investment decisions and execute our trade plans.  

Money management: Money management is the guarantee of success. It helps us allocate funds wisely and avoid taking excessive risks.

So, whether a trade is successful cannot be judged by success rate or profitability alone. We must consider all these aspects together.  

For example, if a trading strategy has a high success rate but low profitability, the trade might not be successful. Even though we win many times, the profit from each trade is small, so the overall return may be unimpressive. On the other hand, if a trading strategy has a low success rate but high profitability, it might also fail.  Although we win fewer times, each win is big, but if there are too many losses, the overall return could still end up not being ideal.

Therefore, we need to find a balance, pursuing high profitability, controlling risks and developing solid trading strategies and money management plans. Only by doing this can we achieve long-term and stable profits.

The principle here is the same as our approach with DJT. First, for the success rate of investments, by following the rule of "green candles engulfing red candles" to buy DJT and using the quantitative trading system to identify this trading signal, the probability of profit can reach over 90%.

However, actual profits depend on where we choose to take profits and the success rate decreases as the target price increases. For example, if the first target is $39.5, the second target will be harder to reach or might take longer to hit.

So, profit expectations are greatly influenced by the actual operations. We need to choose the right take-profit points based on market conditions and personal risk preferences and develop a reasonable money management plan.

Our Quantitative Trading System version 5.0 has been optimized based on the issues encountered in the above investment strategies. It uses the latest AI technology, combining successful experiences from top analysts and AI, solving the following problems:

1. More accurate take-profit point prediction: The system learns from large amounts of historical data and market trends, allowing it to predict take-profit points more accurately, helping investors maximize their returns.

2. More reasonable risk control: The system adjusts stop-loss and take-profit points automatically based on market fluctuations and investor risk preferences, effectively managing risk and avoiding major losses.

3. Smarter trading strategies: The system selects the best trading strategies based on market conditions and investor goals and adjusts strategies in real-time based on market changes to improve trading efficiency.

Thus, version 5.0 of the Quantitative Trading System helps investors make more scientific and rational investment decisions, leading to long-term stable profits. This system will begin internal testing next month, and it's something we should all look forward to.

That’s all for tonight's session. In the next class, I will teach you how to identify high and low price points using support and resistance levels. Through tonight's lesson, I hope it will help you better understand the pros and cons of the Quantitative Trading System. I also hope everyone will actively participate in next month’s internal testing of version 5.0, providing a lot of trading data support for the system's upgrade and experience its powerful features.

For those of you who want to keep up with the latest trades, please get your trading accounts ready and participate with a small amount of capital. By learning and trading at the same time, you’ll not only learn investment knowledge but also gain significant profits. Any investment-related questions you have during the next trades, feel free to consult me.

Through tonight’s lesson, please think about:

1. How will the UK stock market perform in the near future?

2. What indicators should be considered when measuring if a trade is successful?