3. Enter a Position at the Turning Point - A High-Risk, High-Reward Game of Edge
⭐ The "turning point" refers to the point at which the market changes direction, marking a shift from a decline to an increase or from an increase to a decline. Entering a position at the turning point is what most of us refer to as "counter-trend" trading. The market has not yet reversed, but after a long decline → a signal of a halt in the decline appears → seize the reversal and enter at the point. Theoretically, capturing a segment of the market from its starting point is the most lucrative, yielding the highest profits. Below, I will explain the steps for entering a position at the turning point using charts.
The advantages of entering a position at a turning point
(1) Getting in at the starting point offers the best profit. Once the trade is correctly executed, you are among the first to enter, maximizing profit potential. (2) Small stop-loss, extremely high risk-reward ratio. Enter near the turning point with limited stop-loss space. A small stop-loss means lower risk, as entering at the starting point also offers the best risk-reward ratio. (3) With a base position, it is advantageous to add positions later, providing strong operability. Entering early, as the market rises slightly, allows you to use these floating profits as leverage to add positions, benefiting from both technical support and the psychological advantage of having floating profits.
The risks of entering a position at a turning point.
(1) Guessing the bottom, not cutting losses, holding positions, and averaging down. The logic of turning point trading is that the lower it falls, the higher the probability of a turning point, so many people guess the market wrong, unwilling to cut losses, thinking that the price is lower and buying at a better advantage, trying to evade losses by averaging down, but end up getting trapped and buried deep inside. (2) Guessing the bottom without signal confirmation. Buying in based on a feeling, thinking the market has already dropped significantly and is about to bottom out, only to find that there is still a long way to go. (3) After entering the market, encountering volatility and false breakouts, getting washed out. Sometimes the market does not immediately rise after reaching the bottom, but forms volatility at the bottom, which tests our patience in bottom fishing. There will be false breakouts during the bottom volatility that wash us out before the market starts again. (5) Prone to emotional trading. Bottom fishing trading can easily turn into a struggle with the market, continuously buying as the market falls, cutting losses along the way, resulting in significant losses.
💡Tips for Entering a Position at Turning Points to Improve Win Rate
(1) Establish a complete set of technical standards for entering a position at turning points, relying on signal confirmation to catch the bottom. In practical operations, the most commonly used methods must meet three technical standards, such as K-line signals, trading volume signals, and horizontal support level signals. (2) You can try small positions to test the waters and add positions when you're right. After all, this model involves high-risk trading, so you can try with 10%~20% of your position; if it profits, then add to the full position while strictly controlling the risk. (3) Trend trading is best; for example, if the daily line is bullish, trading at the hourly turning points allows for greater certainty and profit. (4) Don’t rush for the first signal; wait to enter the market when you see a pullback. Market bottoms are usually accompanied by increased trading volume, and the K-line’s amplitude also expands, which is a very obvious first signal. When this first signal appears, don’t rush to enter; it’s better to wait until the market stabilizes and slightly pulls back before entering, making it more secure.
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