3.2 Core Strategy for the Market Tomorrow

Short-term trading is essentially “leveraging trends to make quick money”—using themes and popularity, capital cooperation, and trend inertia. [Taoguiba]

You must adhere to three iron rules:

Only trade strong stocks, avoid weak ones;

Go long online, observe offline, cut losses if breaking support, enter and exit quickly;

Focus on core stocks, stay away from miscellaneous ones.

1. What is the core, and what are the miscellaneous?

2. How to identify and operate the “core”?

Step 1: Identify the strongest sector of the day

After 30 minutes of trading, check the “Sector Gain List” on Tonghuashun or Eastmoney.
Exclude one-day speculative themes, choose sectors with policies, events, and logical continuous catalysts.
Pay attention to sectors with at least 3 stocks hitting the daily limit, and a complete echelon (first limit, second limit).

Step 2: Find the core within the strongest sector

Space Dragon: The stock with the highest number of consecutive limit-ups within the sector (e.g., 5 consecutive limit-ups).
Popularity Dragon: The stock with the highest trading volume and discussion within the sector (not necessarily the most consecutive limit-ups).
Trend Dragon: The solid stocks in the sector that are steadily rising along the 5-day/10-day moving averages.

Step 3: Execute the ultimate discipline of “focusing on the core”

Buy only the first place: If conditions permit, buy only the top stock in the sector. If you dare not buy the leader, better not trade in this sector.

Buy on divergence, sell on consensus:

Buy point: When the core leader first shows healthy divergence (e.g., rapid rebound after sharp opening dip, quick recovery after breaking support).
Sell point: When the core leader accelerates and consensus turns bullish (e.g., first large volume after a continuous limit-up, or a huge volume at a high level indicating stagnation).
Cut losses immediately if the stock breaks support: For sector leaders that hit the limit, if they fail to open higher the next day (break support), exit immediately without illusions.

3. How to thoroughly “stay away from miscellaneous stocks”?

Proactively block: Only keep core targets in your watchlist, do not look at stocks on the last pages of the gain list.
Reject temptation: When miscellaneous stocks suddenly surge, ask yourself: “Is it the leader? If not, why is it rising?” (Usually: to unload).
Position constraint: Even if trying a very small position to test miscellaneous stocks, strictly limit single-stock position to no more than 2% of total capital, to prevent large losses.
Review and reflect: If losses come from miscellaneous stocks, record it in your trading journal, reinforcing the “miscellaneous = loss” muscle memory.

Core philosophy

In short-term markets, capital and attention are scarce resources, always gathering where the most dazzling. “Core” stocks enjoy liquidity and sentiment premiums, while “miscellaneous” stocks bear liquidity discounts and selling pressure fears. Your task is not to find undervalued stocks but to dance with the market’s strongest funds in full view, and leave first before the tune changes.

Remember: In short-term trading, every pity or luck on miscellaneous stocks is a betrayal of your capital. The biggest profits come from the core, and the biggest losses often stem from refusing to cut losses on miscellaneous stocks.