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The Formula of Box-Pi
It has been 20 years since I jumped into stock investment. Since I opened my account out of simple curiosity during high school, I have been trading almost without interruption.
During this time, the Korean stock market has shown similar patterns. It was a phenomenon referred to as 'Box-Pi', where selling occurred when prices rose and buying when prices fell. No matter how good the market looked, there was always the certainty that a correction would come.
The market moves within a certain range, and its flow has not deviated from expectations. So, analyzing charts to distinguish between highs and lows, and utilizing leverage and inverse 2x products to capitalize on index volatility has long been a valid strategy.
The market eventually returns to its place.
Over the past 20 years, there has been a set of criteria that led my investment decisions. I believe individual investors like myself have had similar experiences.
The Daily Reversal
On February 2, the risks highlighted by Fed Chair Kevin Warsh led to significant market volatility.
In just one day, the index plummeted, and the prices of commodities like gold and silver also fell over the weekend. Watching this situation, I had a feeling that it was the beginning of a correction.
At that point, I had already secured a good amount of put ELW and KOSPI 200 inverse 2x products. So I felt like I had aligned my outlook with the market’s direction.
I guess it will drop for a few days.
The market took an unexpected turn in just one day. After the sharp decline on February 2, the index surged on February 3 as if nothing had happened.
The correction was shorter than expected, and I quickly experienced losses approaching -10%.
What was even more shocking than this loss was the feeling that the investment principles I had taken for granted were shaking. I felt that I had not properly recognized the change when the KOSPI reached 5,000.
The Changed Market
This upward trend was distinctly different from previous ones. It was not just a simple theme surge or the intervention of speculative forces; there were solid reasons behind it.
AI semiconductors were at the center, supported by performance and fundamentals. The flow of global funds, technological prowess, and performance figures acted together to drive the upward momentum.
This may not just be a simple rebound but a structural change.
The past stock market was heavily distorted, with many stocks surging without reason. This led to a strong tendency to rely on short-term trading, emphasizing timing over value. A period where charts dominated as the main basis for judgment.
However, after witnessing the rise of AI semiconductors, my perspective on investment is changing. It is now more important to understand the essence of industries and companies and to approach investing based on this understanding rather than relying on short-term corrections and inverse strategies. It is required to uncover undervalued value stocks and conduct thorough analyses of performance and structure instead of being swayed by themes.
When the market changes, investors must change too.
Giving up on the Box-Pi style trading that I have been used to for 20 years is certainly not an easy task. However, this experience provided a clear warning.
I realized that the environment of the Korean stock market has significantly changed, and if I cannot adapt to these changes, successful strategies from the past may no longer be valid.
#National Investment, #Personal Investor Reflection, #AI Semiconductor Rally, #Escape from Box-Pi, #Stock Investment Experience, #KOSPI 200, #Inverse Investment, #Fundamental Investment, #Value Stock Investment, #Change in Investment Paradigm
Frequently Asked Questions (FAQ)
Q. What is the Box-Pi phenomenon, and how have we responded to it until now?
Box-Pi is a market phenomenon that repeats fluctuations within a certain range, where selling at highs and buying at lows has been effective.
Box-Pi means that the Korean stock market moves within a certain range. Over the past 20 years, the approach has primarily been to sell during rising periods and buy during falling periods. This method has been a stable investment criterion by analyzing charts to distinguish between highs and lows and utilizing leveraged and inverse 2x products to take advantage of index volatility. It has been believed that market corrections will inevitably occur, and this strategy was considered effective.
Q. What was the significance of the abrupt fluctuations in early February?
Experiencing a sharp drop on February 2 followed by a surge on the 3rd confirmed the shaking of existing investment principles and the changes in market environment.
On February 2, an emphasis on risk following the remarks of the Fed Chair caused significant drops in the market. At that time, there was a sense that a correction was beginning, and I prepared by positioning inverse products. However, the next day, February 3, the index surged as if nothing had happened. This led to close to a -10% loss and was a shock that shook my investment principles. This was a signal that there had been a fundamental change in the stock market environment after the KOSPI broke through 5,000.
Q. What are the key factors driving the recent rise in the KOSPI?
The strengthening of performance and fundamentals centered around AI semiconductors has been driving the upward trend, combining global funds and technological strength.
This upward trend has a solid foundation unlike previous simple thematic surges or speculative interventions. AI semiconductors are at the heart, supported by performance improvements and fundamentals. The flow of global funds, technological capabilities, and corporate performance numbers are driving the KOSPI rally. This presents a stark contrast to the past market which relied on timing and distortions.
Q. What are the differences between past Box-Pi investment strategies and the current market situation?
In the past, short-term trading focused on charts and timing was predominant, whereas now long-term investments are centered around fundamentals and value stocks.
The past stock market heavily relied on short-term trading due to significant distortions. Charts served as the main basis for judgments, and the investment paradigm focused on timing and corrections. However, the rise of AI semiconductors transformed the investment perspective. It has become important to understand the essence of industries and companies and to discover value stocks based on performance and structure. Movements toward a transition away from being influenced by themes to fundamental investment are expanding.
Q. What should individual investors consider to move away from Box-Pi investment methods?
Investors should adapt to market changes and prioritize fundamental value investing and performance analysis.
Giving up on the Box-Pi style trading that I have been accustomed to for 20 years is not an easy task. However, the recent experience highlights that the domestic stock market environment has significantly changed. Failing to adapt may render past successful strategies obsolete. Individual investors need to carefully analyze the essence of industries and corporate performance, focusing on uncovering undervalued value stocks. A paradigm shift towards considering long-term growth potential rather than relying on short-term corrections and inverse strategies is necessary.
