I’ve been thinking about an investment approach lately, and actually, many people still have some misconceptions about bottom-fishing in stocks. The idea of bottom-fishing isn’t about guessing whether today is the absolute lowest point, but about judging whether the downside risk has become limited and whether the probability of an upward rebound has significantly increased. Over the past few years of my own trading, I’ve found that if this logic is applied well, it can indeed help capture quite a few short-term opportunities.

The core logic of bottom-fishing is essentially leveraging the gap between value and price. When a stock is pushed down excessively due to negative news, market panic, or special events, but its fundamentals haven’t truly deteriorated, or the negative factors have already been fully digested by the market, that’s a signal to enter. But here’s a key point: not all undervalued stocks are worth bottom-fishing. You need to confirm that there’s trading activity, rebound potential, and most importantly, that there’s capital willing to absorb the position later on.

When I judge the timing of bottom-fishing, I usually look at two levels. The first level is the overall trend—confirm whether the broader market or the individual stock is in a bullish or bearish phase. If the medium- to long-term moving averages are still upward, and a short-term decline is just a correction, then bottom-fishing leans toward buying on the dip with the trend. 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. The second level involves fundamentals and news—whether there are market signals indicating a change in direction.

Taking the 2022 META case as an example, after the earnings report announced losses in the metaverse segment that exceeded expectations, the stock gapped down sharply. During that period, the market gradually digested the selling pressure, but the stock price never effectively broke above the previous rebound high, indicating that each rally became an opportunity for trapped shareholders to exit. At that point, I chose to stay on the sidelines, patiently waiting for two conditions: selling pressure to gradually subside, and a new wave of upward momentum to emerge and break through the previous high. Usually, this process looks like “gap down → sideways digestion → breakout of the range’s upper boundary.” Entering during this phase isn’t at the absolute bottom, but it’s relatively safer.

The 2020 COVID-19 pandemic is also a classic example. The market once plunged in panic, but after the Fed announced unlimited quantitative easing, capital flooded back in, and the stock market rebounded strongly. This macro environment change created a high-probability bottom-fishing opportunity, though it’s often hard to catch.

To improve the success rate of bottom-fishing, I usually focus on three points. First, clarify the negative news—distinguish whether it’s a one-off event or a structural problem. Second, look at technical indicators—whether the stock price has fallen near long-term moving averages, whether there are long lower shadows or volume at the bottom, and whether RSI or MACD show divergence. Lastly, and most critically, set clear profit-taking and stop-loss levels. Bottom-fishing is fundamentally a short-term strategy. I typically set a stop-loss at 1-2% loss and exit, and take profits at 5-7% or when the stock can’t break previous highs. It may seem conservative, but in the long run, as long as each loss is kept small and successful bottom-fishing yields larger returns, even if not every trade is successful, the overall expectancy remains favorable.

Many traders use leverage tools to operate bottom-fishing because short-term gains are usually only a few percentage points. Using leverage, under strict risk control, can amplify returns. Individual stocks are often traded with 3-5x leverage, while indices can be leveraged more. The key is to have a clear entry logic, strict capital management, and disciplined execution.

Ultimately, stock bottom-fishing means finding that zone where “selling pressure has mostly been released, downside risk is limited, and a short-term rebound is worth a try.” The real determinant of profit or loss isn’t a few miraculous moves, but consistently executing your plan with proper stop-loss and take-profit orders. If you want to practice this method, start with a demo account, limit yourself to stocks with clear negative news and technical signs of stabilization, and apply strict stop-loss and take-profit rules. Once you’re familiar, then move on to real trading.