First, let's throw out a few issues that are very much worth discussing.

1. In the stock market, is the essence of value the price itself?

Value investing is actually a very elusive concept, because the essence of value is hard to define and explain.

But looking at the outcome, the essence of value is actually the price itself.

So-called "earning money from value" is still about buying low and selling high; what is earned is the money from the price.

The true value is the change in the difference between high and low prices.

Gold buried in the sand is worthless, and what investors need to do is to dig up the gold and then sell it somewhere else.

The price is the most direct reflection of value, and this point is irrefutable.

No matter how good something is, if the market does not recognize it and the price does not go up, it is not valuable.

But investing is about the times, that is, different times have different prices, the market's cognition of a stock, and the supply and demand of chips are all different.The value at present, which is fair value, is determined by the rules themselves.

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What you actually need to do is to predict the future price trend, whether there is room for price increases, which is the value space.

Understanding this issue will make it clear why stock trading itself should respect the price rather than the value.

2. How to define a good price, who defines it?

How to define a good price is also the core of the problem.

From the result, if a stock that was 10 yuan rises to 100 yuan, then 10 yuan is obviously a good price.

If 100 continues to rise, and rises to 200 yuan, then 100 is also a good price.

But if 100 yuan starts to fall, and falls to 50 yuan, then 100 yuan is definitely a very bad price.

These are all based on the result to infer the price at that time, anyone can do it, and there is not much value in actual trading.

The price itself is defined by the buying and selling parties in the transaction.Any price, once it appears, signifies that there is a transaction between buyers and sellers at the moment, with the exchange of supply and demand.

The rise and fall of prices are determined by supply and demand, and there is actually no necessary connection with performance or anything else.

Why doesn't a stock with good performance rise? Because the capital feels that its current price is not ideal and is unwilling to buy.

But at a certain point, the capital will buy the stock again because of its good performance, because they believe that the current expectations and market supply and demand have changed.

The definition of all prices must follow the results, that is, respect the will of the capital.

3. Why does valuation often fail in front of the price?

Many friends like to judge the high or low price of a stock based on valuation, but this method is actually wrong.

Valuation is just a standard to measure the current price of a stock and the historical fair price.

That is, we can use historical valuations to judge whether the current price of a stock is more expensive or cheaper than in the past.

But this does not mean that the current price is definitely expensive or cheap.The key issue lies in the fact that the performance of listed companies is dynamic, and valuation itself is dynamic.

If a listed company's performance continues to improve, then even the current high price-to-earnings (P/E) ratio is considered undervalued.

On the contrary, if the company begins to decline, the valuation is always high because once it incurs losses, the valuation could potentially become negative.

Return on equity (ROE) and price-to-book (P/B) ratio are good standards for judging valuation, but in front of the price, they are also insignificant.

The trend of the price, from a certain perspective, actually reflects the changes in valuation expectations, which is truly effective.

4. What is the deep relationship between dividends and price?

The last question is that there is actually a connection between dividends and the price itself.

Although dividends are not significant in the market, accounting for a relatively small proportion, dividends themselves have another level of price definition for stocks.

If a company's net profit is relatively stable, that is, the dividend amount is relatively stable, then using the dividend yield to determine the price is more convenient.

For example, a stock that pays a dividend of 1 yuan for every 10 shares, if it is priced at 3 yuan, it is 30 yuan for 1 yuan of dividends, with a dividend yield of 3.33%.If the stock price rises to 5 yuan, then it would be a dividend of 1 yuan for every 50 yuan, which is a 2% dividend yield. If the price is higher, the dividend value will be relatively lower.

However, there is one point to note: the dividend yield itself is calculated based on the purchase price to determine the rate of return, not the current price.

For example, if you buy a stock at 3 yuan and the dividend yield is 3.33%, even if the price rises to 30 yuan, for those who bought at 3 yuan, the dividend yield remains at 3.33%. However, for those who bought at 30 yuan, the dividend yield is only 0.33%.

Therefore, the value of the dividend is closely related to the price you bought at, and it actually has no relation to future price fluctuations.

Now, let's talk about how to choose a good price.

Defining a good price from a capital perspective actually has two scenarios.

The first scenario is a good price for the long term.

A good long-term price refers to a relatively low price in a large cycle.

The selection of a good long-term price is basically determined and analyzed from the perspective of fundamentals.That is to say, after buying, it does not necessarily rise immediately, and it is uncertain when it will rise.

Such a good price is defined by long-term capital because only they buy a large amount at a relatively low point.

But from the perspective of the market, it will be a stage of low turnover, wandering at the bottom of a valley, and it is unknown when the value can be reflected.

Moreover, it is easy to appear a continuous decline.

Unless you can accurately grasp the direction of future performance, do not easily judge where a long-term good price is, it is easy to step on a mine.

In addition, a long-term good price is also accompanied by the patience of investors to hold, and those who want to see results in the short term are not suitable.

Making good use of the valuation + fixed investment method can often get a long-term good price for a stock.

The second situation, a good short-term price.

A good short-term price is completely different from the long-term.

The short-term refers to the prediction that this stock is about to start, and the current is a low price point, and the price will be higher in the future.The good prices in the short term are clearly determined by short-term capital and market heat. Therefore, the logic of short-term and long-term speculation is completely different.

Short-term trading relies on capital, focuses on sentiment, and is about the supply and demand of chips. The good price in the short term is actually the grasp of the starting point and the emotional game with capital.

"Not releasing the hawk until seeing the rabbit" is the best evaluation for the good short-term price, and chasing the rise in the short term is not a wrong trading method.

The short-term price system should be comprehensively analyzed according to the entry of capital and the heat of the market. So-called valuation and expectations actually seem worthless in the face of popular themes and short-term trends.

Being sensitive to market sentiment is the most important prerequisite for doing a good job in short-term trading. Short-term technology must also obey sentiment, and behind sentiment is actually the game of capital.

A good price, it sounds simple, but it is difficult to do, because the trading system itself must be suitable for the price system.

Retail investors are too "casual" when buying and selling stocks.There is no fixed price to buy at; instead, one should follow their heart.

Especially the fear of rising prices often leads to the buying point being right now, and it is very easy to be fully invested.

When you do not have a standard for judging a good price, the error rate of trading will rise sharply, and taking over naturally follows, because capital is best at mobilizing the emotions of retail investors.

Why is it that some things, which seem not complicated and the principles are understood, just cannot be achieved? It is because of human nature.

Investing is against human nature, and it requires overcoming human nature and facing one's own emotions.

No matter how much you learn about valuation pricing, how many industry races you watch, or how much theory you understand, it is not as good as the unity of knowledge and action.