Recently, I’ve been pondering a question: why do some people make money by bottom-fishing, while others always miss the mark? Actually, the key isn’t whether you can predict the lowest point, but whether you understand when it’s truly worth entering the market.

I’ve found that many people have misconceptions about bottom-fishing, thinking that as long as the stock price is cheap, it’s a good buy. But in reality, there are plenty of assets in the financial markets that are undervalued over the long term; cheap doesn’t necessarily mean there’s an opportunity. The truly suitable bottom-fishing targets need to meet several conditions simultaneously. First, there must be trading activity, meaning the stock has experienced significant price fluctuations and considerable trading volume over a period, especially after negative events that cause sharp declines. Second, there should be rebound potential, which requires technical and news analysis to determine whether the downtrend has dulled or if there are signs of stabilization.

My experience is that the timing for bottom-fishing can be roughly divided into two levels. The first level is looking at the big picture—assessing market changes and trends to identify potential bottom areas. You can analyze chart patterns, such as V-shaped bottoms or double bottoms on candlestick charts, or combine technical indicators like moving averages, RSI, KDJ, etc., to judge whether the asset is oversold. The second level involves fundamental and news analysis—observing whether there are signs of a change in market direction.

For example, take the overall market. In 2022, the Fed’s rate hikes and balance sheet reduction led to a market decline. But when inflation peaked in October and started to decline, the policy shift became a clear reversal signal. Similarly, during the COVID-19 crash in 2020, the Fed announced unlimited quantitative easing, which flooded the market with liquidity, leading to a strong rebound in stocks. These macroeconomic shifts often create higher-probability bottom-fishing opportunities.

In a bull trend, I often watch the slope of moving averages. If the medium- and long-term averages are still trending upward, a short-term dip is just a correction, and bottom-fishing tends to be a low-cost entry in the trend’s direction. But if the moving averages start to flatten or turn downward, you need to carefully distinguish between a short-term rebound and a genuine bottoming process. Using Bollinger Bands together can also be effective—when the index falls near the lower band, it’s a potential buying opportunity; when it rebounds to the upper band or hits profit targets, take profits.

Individual stock bottom-fishing usually occurs when a single company faces major negative news, such as disappointing earnings or management’s comments causing concern. For example, in early 2022, META’s stock plunged sharply due to worse-than-expected losses in the metaverse segment. The most prudent approach then is to wait patiently for two conditions: first, selling pressure diminishes, and the stock stops making new lows; second, a new rally begins and successfully breaks through the previous rebound high. This often follows a pattern of “gap down → sideways digestion → breakout above the range.” While this isn’t the absolute lowest point, it’s relatively safer to enter.

To improve your bottom-fishing success rate, I recommend gathering more information to confirm that the entry price is indeed at the bottom. First, clarify what the negative news actually is—whether it’s earnings issues, management comments, or a one-time event. If the main negative factors have been thoroughly discussed and no new bad news keeps emerging, and if the decline exceeds what fundamentals justify, then the chances of a rebound increase. Second, use technical analysis to find support and signs of stabilization—such as the price approaching long-term moving averages, quickly recovering after briefly breaking below Bollinger Band lower bands, or candlestick patterns with long lower shadows or MACD divergences. The more conditions that are met, the lower the probability of a further breakdown, and the higher your chances of a successful entry.

Another crucial point is setting clear take-profit and stop-loss levels. Bottom-fishing is fundamentally a short-term or medium-term strategy, not a plan for a three-year hold. I suggest placing stop-losses very close—around 1-2% loss—and exiting immediately if hit. For take-profit, aim for 5-7% gains or sell if the stock reaches a previous high without breaking it. As long as you keep each loss small and each gain within 5-7%, even if not every trade succeeds, your overall expected return can remain decent.

For investors looking to leverage for higher returns, bottom-fishing often involves tools like futures, options, or CFDs. Most individual stocks are traded with about 3-5x leverage, while indices, due to lower volatility, can be traded with around 10x leverage. CFDs are advantageous because they offer a wide range of products, simple cost structures, and flexible trading conditions—allowing a single account to access multiple markets. This makes it more convenient for those seeking bottom-fishing opportunities across different markets.

Ultimately, bottom-fishing isn’t about predicting tomorrow’s rise but about finding a zone where selling pressure has eased, downside risk is limited, and a short-term rebound is worth trying. What truly determines your profit or loss isn’t a single “miracle” trade but whether you can stick to your stop-loss, take-profit, and capital management rules. If you want to practice this method, start with a demo account, focusing only on assets with clear negative news and technical signs of stabilization, combined with strict 1-2% stop-loss and 5-7% take-profit rules. Once you’re comfortable, move to real trading. Bottom-fishing, when done well, can help you seize opportunities during market panic, but only if you have discipline.