Longchang Enlightenment — What is the Dragon Head? How to identify it? How to trade? Where are the risks?

Hello everyone, you can call me Xiaoxin, but I am not a novice in the stock market. I have been trading for several years and have developed an effective trading strategy. Today, I am here in Taoxian to learn and exchange ideas with everyone as a newcomer, to record my trading plans in real-time, and to share my trading insights. I hope we can improve together! [Taogu Bar]

My trading system can be summarized with words like “timing, main theme, leader, low frequency,” which is the Dragon Kong Dragon model.
To pique your interest, please allow me to share a few recent trading charts. These are all recent trades; as long as there is a market leader, I generally participate. Later, I will analyze these trades in conjunction with this article and include trade records to prove the authenticity of my low-frequency trading approach.

Below are my insights on market leaders, covering aspects such as “What is a leader, why trade leaders, how to find them, how to trade, and where are the risks.”

1. What is a leader?
   Leaders come in many forms: space leaders, crossing leaders, sentiment leaders, rebound leaders, pre-existing leaders, cycle leaders, etc. Their definitions vary, and so do their names.

• Space leaders are the highest boards in the market, e.g., Henan Energy & Chemical Industry Holding Co. this week is a space leader; earlier, iReader Technology was a market space leader on the day. Silver and Colored Metals and Fenglong Shares were also market space leaders at the time.
• Crossing leaders are those that have crossed from one hype cycle to the next, e.g., Aerospace Development originated during the Pingtan hype cycle but did not top out with that cycle; instead, it survived and continued to be a focus in the aerospace cycle.
• Sentiment leaders are used to observe the strength of thematic hype, mainly rising in one go, e.g., Hang Steel Shares during the early Deepeek hype in 2025.
• Rebound leaders serve as cover for the retreat of the main theme; after the main theme peaks, they often create rebound leaders to give the illusion that the hype is still hot. Higer Communications is a typical rebound leader from the commercial aerospace hype earlier this year.
• Pre-existing leaders are stocks that hit the limit-up before the theme explodes, due to their advantageous position, often opening with a single large order the next day, e.g., Tongyu Communications during the commercial aerospace explosion on November 28, 2025.

However, I am specifically referring to cycle leaders, which are the market’s leading stocks, the absolute leaders within the main theme, leading a hype cycle such as Jierong Technology, Dazhong Transportation, Pingtan Development, Aerospace Development, etc. They can evolve from space, sentiment, crossing leaders, and have characteristics like leading, driving, participation, and high popularity:
(1) Leading: They have huge gains, often four or five times, but the market’s biggest gainers are not necessarily cycle leaders. For example, Shengtong Energy and Fenglong Shares have impressive gains but lack other cycle leader traits, so they are space leaders, not cycle leaders.
(2) Driving: They strongly influence the theme and even the overall market sentiment, e.g., Aerospace Development’s continuous rise drives the commercial aerospace hype, with rebound layers emerging constantly.
(3) Participation: Since they do not top out in a straight line but fluctuate with divergence and turnover, everyone can participate. Some may top early with a single line, but if the stock can hold after the initial surge and then continue to rise, it offers participation opportunities.
(4) High popularity: Because everyone can participate actively, capital involvement is high, and they can maintain long-term popularity rankings.

2. Why trade leaders?
   The high profit potential is obvious, but safety is also a key reason. Good trading involves controlling risks—trading leaders can achieve this.
   (1) High profits: Leaders often surge four or five times; if you participate early, you can generate huge returns.
   (2) Safety: Many think that once a leader is confirmed at a high position, it’s less safe, and only low-priced stocks are safe. This is a misconception. Leaders are the safest because of their market position. If they fail, smaller stocks and themes will also decline, and overall market sentiment will worsen. Leaders are the last to fall in a hype cycle, making them the safest.
   (3) Resilience: Leaders are unafraid of abnormal movements, rumors, or clarifications. They have strong resistance, though one should avoid abnormal 200% moves or secondary rumors. For example, Pingtan Development was not afraid of rumors on November 3, and continued to rise after a brief pullback, even reaching new highs later. This resilience provides great confidence to participants.

3. How to find leaders?
   Everyone knows leaders are good and wants to buy them, but how to find them?
   In hindsight, it’s easy to identify leaders, but at the start of a trend, it’s very difficult—this is the most challenging part of the system. I judge based on several dimensions:
   (1) From the sentiment hype cycle: The cycle has stages—chaos, main rise, and retreat. Big leaders are born during the transition from chaos to main rise, or because they exist, the sentiment shifts. It’s hard to find big leaders during the retreat phase, and even if there are leaders, their heights are limited and prone to sharp declines. For example, Silver and Colored Metals had support from themes but were in a retreat phase, so their peaks were limited, and they quickly fell after topping out.
   (2) From thematic hype: The stronger and longer the hype, the larger the leader. As the leader rises, it pushes the theme further, creating a positive feedback loop. For example, autonomous driving and Dazhong Transportation, Huawei concepts and Jierong Technology. I only look for leaders when the main theme is active. The key is to judge whether a theme is the main line, which is a big topic for another time.
   (3) From the individual stock: Leaders must withstand volume divergence tests. What is volume divergence? It shows as large fluctuations on intraday charts, sharply increased volume compared to previous periods, and turnover rates around 40% or more.
   For example, Hehe China, which experienced continuous volume divergence without dying, confirmed as a true leader, opening high the next day. Pingtan Development also experienced a volume divergence on October 30 and survived, confirming it as a true leader.

4. How to trade leaders?
   If finding leaders is a technical skill, trading them is a psychological challenge. “Experts buy leaders, super experts hold and sell at the right time.”
   (1) Overcome fear: Buy the leader immediately once confirmed. It sounds simple, but it’s difficult. When a stock is confirmed as a leader, its gains are already significant. Many worry about topping out, but the leader’s potential remains. The fear of the top often turns out to be a mid-mountain. For example, Hehe China and Pingtan Development both surged significantly after confirmation.
   Jierong Technology’s late-day breakout on August 27 and subsequent rebound the next day can be considered a leader. Buying during the buildup phase is not late; the stock often forms a second wave later.
   Even if you buy at the top by mistake, since true leaders rarely drop sharply, there’s usually a chance for a recovery. For example, Aerospace Development fell sharply after you noticed it but then hit the limit-up the next day and continued upward afterward.
   My core mindset is: as long as it’s a true leader, you can buy anytime before obvious top signals appear, as long as the main theme isn’t retreating.
   (2) Hold!
   Once confirmed, buy immediately and hold. Simple in words, but very hard to do. Without a broad vision and high level of discipline, it’s impossible. Many sell after a day or two of divergence, which is a pity. Holding can generate three to five times gains. Even if you see a 100% increase, there’s still room for more. If you can’t hold, and instead chase short-term profits, you’ll waste the leader. Small funds must learn to hold the leader.
   (3) Sell when risks appear:
   When to sell? Not how much it can rise, but when to cut losses.
   “Buy opportunity, sell risk.” When risk signals appear, it’s time to sell.
   What are the risk signals?
   ① Repeated suppression: It’s normal for the market to suppress abnormal stocks, and leaders are not afraid of rumors, but if suppression intensifies, be cautious. The market may be overheated or cooled, and increased suppression indicates the market is cooling. For example, on January 12, 2025, multiple warning letters and suppression measures were issued, so it’s better to sell the next day.
   ② 200% abnormal move: 100% is a test of a leader, 200% is a red line. Leaders can handle 100% moves but should avoid 200% moves, which are a clear warning.
   ③ Continuous acceleration: Leaders can handle divergence but not continuous acceleration. For example, a stock opens high with low volume, then the next day opens even higher with a limit-up or a straight top. Continuous acceleration indicates the top is near, and profit-taking may cause sharp declines.
   For example, Jierong Technology on August 27 opened high with low volume, then tried to open even higher the next day, which led to a near-limit-down. Fortunately, it recovered later, showing the resilience of leaders.
   ④ Clear top signals: Such as graveyard candles, hanging man, shooting star, double top on K-line charts; or severe chaos and sharp drops on intraday charts.

5. Practical trade analysis
   (1) Aerospace Development: bought on December 23, following the principle that “it’s never too late to buy a leader.” The position was high for most, but I still gained 40 points. Considering the acceleration and limited divergence space, I sold at a high on December 30, but it later gained nearly 20 more points. As a major theme, Aerospace Development is a top leader, and as long as I buy at this position, it’s easy to make huge profits—no special skills needed.
   (2) Xinwei Communication: bought on January 6 at what many considered a high point, following the same principle. It gave good gains, and I held through the decline on January 9, only selling at the peak of the third wave on January 12. I missed the second big rally because I didn’t hold. Xinwei Communication was a representative trend leader during the third wave of commercial aerospace hype starting December 24.
   (3) Hengdian World Studios: bought on February 4 during the Lunar New Year media consumption expectation, in a chaotic sentiment cycle. The large decline was an opportunity to avoid divergence. Many would think this big drop was a top, but it still rose well afterward. I held for three days, not selling at the top, expecting the theme to realize before the holiday. Looking back, the sale was not bad; greed might have led to missing the bottom. It’s a small leader, as the market was in chaos, and media was not a major theme.
   (4) Wangsu Technology: after clearing Hengdian, I switched to Wangsu Technology, a perfect switch. On that day, SD concept stocks surged, but Wangsu showed no performance, so I sold. I missed three days of big gains because I didn’t hold. Later, I took a break for the holiday. Wangsu was not a leader but a trend-following trade.
   (5) Runze Technology: similar to Wangsu, a trend-following trade during chaotic rotation. I bought low during the chaos and gained nearly 20 points in two days.
   (6) Yueneng Holdings: experienced volume divergence on the fifth board, then a small high open on the fifth to sixth board, a typical weak-to-strong transition, a good buy point. Once I find a leader, I usually act immediately and then hold. Although Yueneng Holdings also opened high, it withstood the divergence test and turned weak to strong the next day, unlike Daqian Shares and iReader Technology, which failed the divergence test. The market was constrained by the five-board height for a long time, but Yueneng Holdings broke through to the sixth board, indicating a potential start of a cycle leader. However, since its theme is not yet a major market theme, it’s not yet a cycle leader—just taking it step by step.

6. Low-frequency trading
   The leader trading follows the “Dragon Kong Dragon” model: “Find the leader—buy the leader—hold the leader—sell the leader—find the next leader.” Leaders are scarce; only a few emerge each year, so the market doesn’t always have leaders. This makes leader trading low-frequency, requiring discipline and patience through periods of no positions.
   On the other hand, staying in cash allows you to have enough bullets to catch a leader once it appears. If you trade daily, you might miss the opportunity when the leader suddenly arrives.

Here are my recent trades, which can verify the previous analysis:

• February 4: bought Hengdian World Studios
• February 6: sold Hengdian World Studios, bought Minbao Optoelectronics
• February 9: traded T+0 on Minbao Optoelectronics, bought Wangsu Technology
• February 10: sold Minbao Optoelectronics and Wangsu Technology
• Rested for a few days, then re-entered after the New Year
• February 25: bought Runze Technology
• February 26: bought Yueneng Holdings, sold Runze Technology

Trading requires both external learning—reading books, online courses, master posts—and internal reflection. Internal reflection involves self-assessment: analyzing your trades, understanding why they succeeded or failed, and continuously improving your system and mindset.

From my trading records, a few characteristics stand out:
(1) Low frequency—very few trades, not a “supermarket.”
(2) Stocks are high in popularity, have leading traits, and possess leader qualities, with no unnecessary clutter.
Initially, I also liked to diversify, thinking it controls risk, but I found that the best risk control is reducing unnecessary trades and acting only when confident. Once I learned to control my hand and trade within my system, my profits increased.

7. Risks in leader trading
   Even with high safety and resilience, risks remain. All trading involves risks. The risk in leader trading is not from high positions but from misidentification:

• Failing to identify the true leader and mistaking a false leader for a real one.
  Although I outlined the three-step process and discussed multiple traits, following the above methods can greatly reduce this risk. Still, subjective judgment can lead to mistakes. I have made many errors myself, which helps me stay objective. Developing “fire eyes” requires practice.
  For example:
• Silver and Colored Metals: supported by themes, with divergence and high participation, especially during the 7th to 8th boards, showing leader traits. But after hitting the 8th board, it had three consecutive limit-downs, clearly not a true leader. The problem was the wrong timing of emergence—during a sentiment retreat phase, making it hard to produce a true leader.
• Dawang Technology and iReader Technology: during the SD concept explosion on February 9, both surged on the first board. Many bought during the 4th to 5th boards, but both were cut down afterward. The mistakes were misjudging the main theme and the leader. The main theme is not just hype; it must withstand divergence. The leaders must pass divergence tests, like Jierong Technology and Shenzhen Huaqiang, which initially surged but then failed the divergence test and fell.

8. Enlightenment from the Wang Yangming “Dragon Field”
   Wang Yangming’s “Dragon Field” enlightenment states that “one thought becomes sage.” Trading is a process of enlightenment. If you succeed, you find trading to be very pure. Many focus on techniques but still can’t make money.
   Wang Yangming’s heart-mind philosophy applies well to trading:
   (1) The mind is the principle: The truth is within your heart, not outside. Your heart contains all answers. Many know which leader to buy but are disturbed by external opinions, missing opportunities repeatedly. The real problem is not knowing how to choose but not trusting your inner voice. The answer is inside you; external noise drowns it out.
   (2) Attain innate knowledge: How to look inward? By cultivating conscience. Conscience is the innate sense of right and wrong. It doesn’t need others’ teaching; you are born with it. When you see a leader, a voice inside tells you to buy—this is conscience. Everyone has it; sages listen to it, ordinary people know it but dare not act. Knowing buying the leader is best but not daring to buy is a lack of trust in your inner voice.
   (3) Unity of knowledge and action: Many think knowing and doing are the same, but Wang Yangming said otherwise. True knowledge and action are one. If you know but don’t act, you don’t truly know. For example, we avoid fire because we know it burns; that’s knowledge and action united. If you know staying up late is bad but still do it, you don’t truly know. If you believe a stock is a leader and should buy but don’t, you don’t truly believe. If you truly believe, you will naturally act. The inability to act is because you don’t truly understand; understanding leads to action.

I’ve written so much to share my years of insights on leaders. I hope everyone gains something from it. Please like and comment!
Starting tomorrow, I will begin writing review articles, recording my trades in real-time, sharing insights, and posting pre-market plans. Stay tuned!
These are my pre-market plans for Thursday and Friday. I will share more openly in the future! My trading approach is very pure—only act on good opportunities, stay out otherwise.

Thank you all again for reading! If you think it’s helpful, please don’t forget to like!