Recently studying short-term trading, I found that many people don't have a deep enough understanding of the concept of "bottom fishing." Bottom fishing doesn't mean blindly chasing lows, but rather entering when the stock price is severely undervalued and sentiment is overly pessimistic, then exiting with a profit when the price returns to a reasonable level. It sounds simple, but in practice, there's a lot of knowledge involved.

I discovered a key point: not all undervalued stocks are worth bottom fishing. Some stocks are cheap for a reason and won't rise even if bought. The truly suitable targets for bottom fishing need to meet several conditions at the same time. First, there must be trading activity, meaning the stock has enough volatility and trading volume, especially after negative news causes a sharp decline. If a stock is cold and has no trading activity, even if it's cheap, it's hard to profit from short-term price differences. Second, there should be rebound potential, such as a V-shaped bottom or double bottom on the technical charts, and the negative news has been mostly digested by the market.

Judging the timing for bottom fishing can be divided into two levels. The first step is to look at the overall trend, observing the slope of moving averages to determine whether it's a bullish or bearish trend. If the medium- to long-term moving averages are still upward, a short-term dip is like a correction within a bullish trend, making bottom fishing relatively safer. But if the medium- to long-term moving averages start to flatten or turn downward, extra caution is needed, as the rebound might just be a false bottom. The second step is to analyze the fundamentals and news, to see if there's an opportunity for the market to change direction. Negative news may have already been priced in, so the decline in stock price is limited, which is the so-called "bad news is fully priced in." Sometimes, excessive panic leads to overselling, creating opportunities.

I've seen many practical cases. For example, Meta in early 2022, which plunged sharply due to disappointing earnings reports, leading the market to think the company's direction was problematic. But if you patiently wait until the stock stops making new lows and a new rally begins to break through previous highs, entering at that point isn't the absolute bottom but is much safer. Such short-term trades can often yield a 5-7% profit margin per trade.

To improve success rates, I think the most important thing is to clearly identify negative news. Is it due to financial report issues, management comments hinting at slowing growth, or a one-time event? Clarifying the cause helps judge the rebound potential. At the same time, technical analysis should be used to find support signals, such as the stock price approaching long-term moving averages, long lower shadows on candlesticks, or divergence in technical indicators. The more conditions that are met, the higher the probability of success after entering.

One last point many overlook: set clear take-profit and stop-loss levels. Bottom fishing is fundamentally a short-term strategy, not a plan to hold for three years. I recommend thinking about exit points before entering. Stop-loss can be set very close—if the loss reaches 1-2%, exit immediately. Take profit at over 5-7%, or if the stock hasn't broken previous highs, also take profit. As long as each loss is kept small, and profits are captured when the opportunity arises, the overall expected return will be favorable.

By the way, many traders use leverage tools to improve capital efficiency when bottom fishing, because short-term profit targets are usually only a few percentage points. Without leverage, the contribution to overall assets is limited. Using leverage allows you to establish larger positions with less capital, amplifying returns while strictly managing risk. Individual stocks typically use 3 to 5 times leverage, while index trading, which has smaller volatility, can use around 10 times.

In summary, bottom fishing isn't about predicting whether the market will rise tomorrow, but about finding a zone where selling pressure has mostly been released, downside risk is limited, and a short-term rebound is worth trying. What truly determines your gains or losses isn't a few perfect trades, but whether you can consistently follow discipline with stop-loss and take-profit. If you want to practice this method, start 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 familiar, then move to real trading.