Deepseek summarizes the trading system of "Stock Selection Code" | Valas Voss
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#Excess Returns #Profit Acceleration #Technical Momentum #Risk Control
#Stock selection password
Deepseek summarizes the trading system of "Stock Selection Code"
Summary of the Stock Market Miracles Trading System
The Stock Selection Code was written by Valas Voss, a disciple of William O'Neil. It combines the concepts of growth stock investment and momentum trading, and proposes a stock selection framework centered on "earnings acceleration + technological breakthroughs" to capture the rapid rise of explosive performance stocks. The following is a summary of its core trading system:
1. Stock selection logic: profit acceleration and supply-demand resonance
(1) Fundamental screening: profit acceleration
Quarterly profit growth rate : Net profit growth rate of ≥30% year-on-year for two consecutive quarters, and the growth rate increases quarter by quarter (e.g. Q1 30% → Q2 40%);
Revenue growth verification : Revenue growth rate ≥ 20%, excluding profit growth driven solely by cost reduction;
Profitability indicators : ROE (return on equity) ≥ 15%, gross profit margin ranks in the top 20% of the industry;
Industry status : Leader in a specific market segment, with pricing power for products or services (such as CATL in the field of power batteries).
(2) Technical confirmation: momentum and pattern
Relative Strength (RS) : The stock price ranks in the top 10% relative to the market (RS Rating ≥ 90);
Compact base : the stock price adjustment range is ≤30%, the adjustment time is 3-8 weeks, and the trading volume shrinks to less than 50% of the peak value;
Breakthrough signal : Breakthrough of the base high point with large volume (trading volume ≥ 1.5 times the 5-day average volume).
2. Buying strategy: accurately capture the main rising wave
(1) Three major buying points
First breakthrough of base :
The price breaks through the high point of the adjustment range, accompanied by a significant increase in trading volume;
Case : In 2020, BYD broke through the 60 yuan platform and then rose to 200 yuan in the following six months.
Retracing to support level :
After the breakthrough, the volume shrinks and falls back to the original resistance level (now support level), and the position is increased after the validity is confirmed;
Case : Kweichow Moutai broke through 500 yuan in 2017 and then fell back to the 10-week moving average.
Performance forecast exceeded expectations :
The stock price opens higher after the earnings announcement, and if the gap is not filled within 3 days, intervene;
Case : WuXi AppTec’s net profit in Q1 2021 exceeded expectations, jumping 30%.
(2) Position management
Initial position : 10%-15% of a single stock to avoid over-concentration;
Pyramid position increase : increase the position after the profit reaches 5%-10%, and the total position shall not exceed 25%;
Stop-loss discipline : Exit the market immediately if the price falls below the lowest price of the buying K-line or the support level by 5%-7%.
3. Selling rules: lock in profits and avoid risks
Technical profit-taking signals :
The stock price plummeted in a single day (the decline was ≥7%, and the trading volume hit a recent high);
The relative strength (RS) fell below the 70th percentile (bottom 30% of industry ranking).
Signals of deteriorating fundamentals :
The quarterly earnings growth rate slows down (e.g., the growth rate in Q3 drops below 20%);
Gross profit margin has declined for two consecutive quarters or accounts receivable has surged.
Systemic risk response :
The market index falls below the 50-day moving average and the trading volume shrinks, and the position is reduced to less than 50%;
When industry leading stocks collectively break through, clear out your positions and wait and see.
4. Risk management and psychological control
(1) Risk control rules
Single risk limit : Single stock loss does not exceed 2% of total funds;
Diversified allocation : holding 5-8 stocks covering 3-5 different industries;
Volatility matching : The proportion of positions in high-volatility stocks (such as technology stocks) is lower than that in low-volatility stocks (such as consumer stocks).
(2) Trading psychology
Refuse to "spread the cost" : do not add to losing positions and avoid emotional decision-making;
Isolate market noise : reduce the frequency of watching the market and execute transactions as planned;
Regular review : monthly statistics on win rate, profit and loss ratio, and optimization of buying and selling point rules.
5. Uniqueness of the system
Prioritize profit acceleration : Emphasize the “quarter-by-quarter improvement” of quarterly profit growth rather than simply high growth;
Compact Basis Model : Filter false breakthroughs by adjusting amplitude and time to improve the winning rate;
Industry rotation strategy : give priority to industries driven by "profit acceleration + policy catalysis" (such as photovoltaics in 2021 and AI computing power in 2023);
Practical case verification : CATL (2019-2021), Will Semiconductor (2020), etc. are in line with the profit acceleration and base breakthrough model.
Summarize
The trading system of "Stock Selection Code" is centered on "profit acceleration + technical momentum". It screens high-growth stocks through fundamentals, confirms the start of trends through technical aspects, combines strict risk control and industry rotation, and captures excess returns during performance explosion periods. Its success relies on:
Data sensitivity : timely discover profit turning points and changes in industry prosperity;
Discipline : Unconditionally execute stop loss and take profit rules;
Industry insights : Focus on sub-sectors driven by policy and technological innovation.
This system is suitable for short- and medium-term investors, but it requires high financial report analysis ability, chart pattern recognition and psychological quality. The core formula can be summarized as:
excess return = profit acceleration × technical momentum × risk control .
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