Recently, I’ve been pondering a question: why do some people make money when bottom-fishing, while others get trapped? I’ve noticed the difference isn’t about whether they can predict the lowest point, but rather about their entry logic and exit discipline.

Bottom-fishing, in essence, is buying undervalued assets and waiting for a rebound to profit from the price difference. It sounds simple, but in reality, not all cheap stocks are worth buying. I’ve seen many stocks fall sharply, only to be ignored later, with no rebound in price. So the key point is—are there funds willing to come back and buy?

Suitable targets for bottom-fishing usually need to meet several conditions. First, there must be trading activity, meaning the stock typically has decent trading volume, especially after bad news causes a big drop. If a stock is so illiquid that no one trades it, even if it’s cheap, it’s hard to make short-term profits. Second, there should be a possibility of a rebound; technical signs of a bottom should appear, and negative news should be mostly digested by the market.

My own method for judging bottom-fishing timing is to look at the overall trend first. If the medium- to long-term moving averages are still upward, and the stock price only drops short-term below them, it’s usually a correction within a bullish trend, which is relatively safer. But if the moving averages start to flatten or turn downward, I need to carefully distinguish whether it’s a short-term rebound or a genuine bottoming process. Then I’ll combine this with fundamental analysis and news sentiment, observing how much the negative news has impacted the market. Sometimes, negative news has been fully anticipated, so the stock price only drops slightly; other times, the market overreacts, creating opportunities.

Taking the example of META in 2022, after the earnings report announced losses in the metaverse sector that exceeded expectations, the stock gapped down sharply. But I didn’t rush to buy at that moment; I waited to see when selling pressure would subside. The usual pattern is a gap-down decline, sideways digestion, and finally a breakout above the range’s upper boundary. Entering then isn’t at the absolute bottom, but it’s much safer. As for when to exit, I use the gap as a reference—if the stock strongly recovers the gap, indicating the re-pricing is roughly complete, I can start taking profits in stages.

To improve the success rate of bottom-fishing, I think there are three key points. First, clearly identify the specific reason for the negative news—whether it’s worse-than-expected earnings, management comments, or a one-off event. Second, use technical analysis to find support and signs of stabilization, such as the stock price falling to a long-term moving average, quickly bouncing back after touching the lower Bollinger Band, or candlesticks showing long lower shadows. The more conditions that are met, the lower the chance of a true breakdown. Third, set clear take-profit and stop-loss levels.

Honestly, bottom-fishing is fundamentally a short-term strategy, not a plan for a three-year long-term investment. I usually set a stop-loss at 1-2% and exit immediately if I lose that much, and take profits at 5-7%. The gains may seem small each time, but as long as you control losses and capture relatively larger gains, the overall expected value remains positive. Plus, market sentiment often amplifies fear, causing prices to oversell, and with many trades now automated, price drops to certain levels trigger stop-loss orders, releasing selling pressure. When that selling subsides, it’s often the real entry point.

Many people ask me why I use leverage tools. Simply put, short-term bottom-fishing targets only a few percentage points each time, so without leverage, the impact on overall assets is limited. Using CFD or similar instruments with moderate leverage, under strict risk control, can magnify the returns of each successful trade. For individual stocks, 3 to 5 times leverage is common; for indices, which are less volatile, around 10 times can be used.

Finally, I want to say that bottom-fishing isn’t about predicting whether prices will rise tomorrow, but about finding a zone where selling pressure has eased, downside risk is limited, and a short-term rebound is worth trying. The real determinant of profit or loss isn’t a single perfect operation, but whether you can consistently follow your discipline to cut losses and take profits. If you want to practice this method, I recommend starting with a demo account, focusing only on targets with clear negative news and technical signs of stabilization, with strict 1-2% stop-loss and 5-7% take-profit rules. Once you’re familiar, then move to real trading.