What causes a stock to fall with increased volume?

The so-called stock falling with increased volume actually falls into two scenarios:

One scenario is when the stock experiences a significant drop on the day, and the trading volume also increases at the same time. This situation is generally a normal market condition because a significant drop in the stock leads many people to cut their losses out of panic, resulting in a noticeable increase in the number of sellers. People even sell at any cost, leading to the prices of buy 1, buy 2, buy 3, buy 4, and buy 5 all being transacted.

When a new, lower-priced buy 1 appears, there will also be people selling. This kind of selling at any cost, like a tearful clearance sale, will inevitably lead to an increase in trading volume. It's like when a merchant sells clothes; as long as the merchant is willing to sell at a super low price, the sales volume will generally increase significantly because there will always be people who are attracted by the low price. Low prices are a powerful means of promotion.

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For example, if a stock falls by 10% on a particular day, as long as it is not a limit-down, there will always be people who are greedy for the low price and buy on that day. In this way, the trading volume on that day will be significantly increased. This is the normal state of a stock falling with increased volume. The reason why a limit-down is mostly a volumeless fall is that a limit-down makes people believe that there will be a lower price tomorrow, resulting in a sparse buying volume and an inability to increase the volume due to a significant drop.

The other scenario is when the stock price falls are not obvious on the day, but the trading volume increase is significant. This situation is mostly abnormal. For example, if you sell pants today, the unit price is only 1 yuan cheaper than yesterday, but the sales volume has increased three times compared to yesterday! Is this normal? There must be something strange when something is abnormal.

In my 28 years of investment, I have seen many times when the stock price fell by only 2 cents compared to yesterday, but the trading volume increased by two or three times compared to yesterday. If there is no new news to stimulate the market on that day, there must be a hidden story. For example, on a certain day in a certain year and month, the stock price of Ma'anshan Iron & Steel during the trading day was only one or two cents lower than the closing price of yesterday, but the trading volume increased by more than three times.

This indicates that the selling is strange, why sell so much for no reason? The acceptance is also strange, the price has not been significantly discounted, why be so enthusiastic? A month later, the stock of Ma'anshan Iron & Steel doubled. Of course, there are also cases where the stock price plummeted shortly after this sign appeared.

Therefore, it is necessary to analyze the specific situation of a stock falling with increased volume, and it is necessary to combine the market environment at that time to analyze whether this increase in volume is reasonable, and to analyze whether there are funds actively taking positions or reducing positions.

Although, when I was young, I was good at this kind of volume and price analysis. But now I have basically given up this kind of short and medium-term investment. Now I think this kind of minor skill is not very meaningful, focusing on the company's fundamentals and being a long-term shareholder of excellent companies is the way of investment.From the perspective of the company's fundamentals and valuation, the current A-share market is exactly the time to make a large purchase. Many people always worry about being trapped and always want to see a significant increase immediately after buying. This is simply a fantasy. Where in the world is there such a good thing, where the stock rises as soon as you buy it, and you are not trapped after buying it? Being trapped in the stock market is the normal state. A rise as soon as you buy is the result of luck or praying.

The good prospects of the company's development and low valuation only mean that the probability of long-term investment success is high, but it does not mean that the stock will not fall after buying, let alone that it will rise immediately after buying. The vast majority of investors do not look at the company's fundamentals, and as soon as the stock falls, they think they have made a mistake in buying, and then they start cursing the stock market and even cutting their positions in a panic.

This is the ordinary person, who attributes everything to external factors. They never think about the fact that they have never read a professional book on investment, and they don't understand the most basic financial knowledge. What makes you think you can make money in the stock market immediately when you know nothing? The stock market is not a casino, the stock market is not a lottery station, and the stock market is not a place where you can get rich quickly.

The convenient liquidity of stocks in the stock market and the volatility of the market have given people the illusion that the stock market can make money quickly. In fact, liquidity and volatility are more likely to lead to losses for people. Making money quickly by frequently trading in the market is a matter of luck, just like buying lottery tickets. Long-term investment relying on the growth of the company's performance is a reliable choice.

From a long-term perspective of ten or twenty years, sectors such as consumer goods, new energy, semiconductors, artificial intelligence, and low-altitude economy all have long-term investment value. From a medium-term perspective of one or two years, sectors such as animal husbandry, consumer electronics, and tourism are most likely to usher in a medium-term reversal.