[Summary]
The downward trend is when the price rebounds slightly during a decline and then declines again.
The Three Lowering Methods are a way to read the market price, and at the same time, they can also be used to check where you tend to get impatient.
In actual investment, we start by using it to confirm a reversal of a weak trend. However, we cannot overlook the fact that it is easy to be deceived when the market bottoms out.
In this article, we will organize the lowering three methods not as "knowledge" but as steps to check before buying or selling. Don't rush to conclusions, read according to your financial amount and time horizon.
First, divide using the lower three methods.
When looking at the Lower Three Laws, first separate what you want to judge. The information you need will change depending on whether you want to know the meaning, confirm before buying or selling, or review your current holdings.
Especially for beginners in investing, the easier the words are, the more they tend to take them as a conclusion. The three methods of lowering are not enough to make a decision on their own. If you want to check it, it is more realistic to look at it in conjunction with fund management, holding period, and opposing materials.
Discrepancy between the lower three laws and emotions
If we look at the downtrend as an investment psychology, we first need to make a narrow premise. It is important not to mix up whether you are talking about the market as a whole, individual stocks, NISA or long-term funds.
Checking the following points will make things a lot easier.
| Axis to check | What to see with the lower three methods |
|---|---|
| purpose | What do you use to judge? |
| Time axis | Which is closer to short-term trading, long-term holding, or NISA? |
| basis | Which one is more important: price, business performance, interest rates, exchange rates, or psychology? |
| risk | When things go the other way, where should you look again? |
| action | Will it lead to buying, selling, or doing nothing? |
Points that can easily cause trouble in making decisions
It is not only when you lack knowledge that you stumble with the lower three methods. In fact, there are situations where we interpret something conveniently because we know a little bit about it.
- Record your feelings of impatience and relief when you see the Lower Three Laws.
- Write down the same number of reasons why you want to buy and reasons why you don't.
- Wait a day before making decisions after unrealized losses or sudden rises.
- Reduce trading amounts on days when emotions are strong
The important thing here is not to settle on a single correct answer based on the lower three methods. In investment, the meaning of the same material changes depending on the market, holding period, and amount of funds. When in doubt, prioritize confirmation over conclusion.
Checklist before buying and selling
Before using the lowering three methods as a basis for making an actual decision, please check at least these five points.
- Can you explain in one sentence the purpose of watching the Lower Three Laws?
- Have you confirmed one or more countermeasures or failure conditions?
- Are you investing your living funds or money that will be used soon?
- Have you decided in advance the criteria for cutting losses, taking profits, and continuing to hold stocks?
- Are you making judgments based only on social media or short headlines?
Checklists are simple, but they prevent you from adding reasons after making a decision. The purpose of checking the lower three methods is not to speed up your actions, but to reduce unnecessary mistakes in judgment.
Summary
The three methods of lowering are materials for organizing investment decisions. Even if you read it as an investment psychology, if you treat it as a standalone buy or sell signal, your judgment will be inaccurate.
The points to keep in mind are as follows.
- Decide the purpose of viewing the lower three methods first.
- Do not mix time axis and amount of funds
- Check not only good materials but also negative materials
- When using NISA and long-term funds, consider how to handle losses
- When in doubt, reduce your position or postpone it.
The more knowledge you have, the safer it seems, but in the market it can become dangerous if you use it incorrectly. It is realistic to use the lower three methods as a tool to pause before buying or selling, rather than as words that force you to make a hasty decision.