Dealing with market surges and pullbacks: effective investment strategies and tools

The first strategies that come to mind are momentum trading and grid trading strategies. Let's discuss them in conjunction with the tools.

This strategy assumes that if an asset has significantly risen in the short term, it is likely to continue rising, and the reverse is also true. In simple terms, during a bull market or when there is a clear one-sided upward trend, you buy high and sell higher.

The risk of this strategy is that the market can pull back at any time, so you need to be more sensitive to changes in the market conditions.

How to implement this? The logic is quite simple: use technical indicators to filter stocks with a clear upward trend, then conduct a secondary screening with fundamental analysis. Set a stop-loss point, buy and hold, while monitoring the trend using technical indicators. Sell at the stop-loss point, or when signs of trend weakening appear. Let's go step by step.

There are already many ready-made indicators for identifying upward trend signals in the screener. For example, a long arrangement of MA and EMA indicates that the short-term, medium-term, and long-term MA and EMA are aligned from top to bottom, with all directions pointing upward, which may suggest that the market is in an upward trend.

Additionally, low-level golden crosses, bullish divergences in indicators like KDJ, RSI, and MACD, as well as BOLL breaking through the middle and upper bands, can all signal a reversal upward or an enhancement of the upward trend.

If you want to avoid certain risk factors, you can also set conditions in the stock screener, such as changes in price, trading volume, turnover rate, etc.

Step 3: From the filtered list, you can check for stocks that you are familiar with and believe they have good fundamentals.

In the company tab of the stock detail page, there is a wealth of information, including performance metrics, analyst ratings, company valuation, financial indicators, and financial forecasts that can serve as references.

Of course, if you feel that relying solely on a technical indicator to filter stocks with upward trends is not convincing enough, you can also look at the analysis tab in the stock detail page to gain more insights into various indicators or funding analysis.

Step 4: Through the previous steps, you may have identified stocks that you're interested in buying.

At this point, to mitigate risk, you can set a stop-loss point, for example, selling if your losses exceed 10%, to prevent further losses. Additionally, continue to monitor the indicators you have filtered for any signs of trend weakening.

Diversification and position management are also important. You should allocate your funds within a risk range that you can bear.

Step 5: After purchasing, you need to stay attentive to market changes while holding these stocks, as we are employing a relatively short-term strategy! Finally, sell your position at the stop-loss point or when signs of trend weakening appear.

If you are investing according to the momentum trading strategy, this is generally the thought process and steps involved. However, since the market may also fluctuate in the future, I will briefly share a grid trading strategy that is suitable for volatile markets.

This is a different approach. If the momentum trading strategy focuses on trends leading to individual stocks, then the grid trading strategy focuses on individual stocks leading to trends.

For example, let's say you are optimistic about Stock A. First, you can divide your funds into several portions and buy 10,000 shares at a price you consider reasonable (e.g., $4.75). Then, set a price range (e.g., $0.25). Next, for every $0.25 decrease in price, you buy another 10,000 shares, and for every $0.25 increase in price, you sell 10,000 shares.

Of course, if the price continues to decline, you will face the risk of losses. Therefore, this strategy is more suitable for stocks that have a positive long-term outlook but may experience short-term fluctuations. You should also carefully consider the costs associated with frequent trading and the size of the grid.