Is it really a wise move to follow the trend of buying the dip after Japan's interest rate hike?

In the past two days, the most repeated phrase in the trading room is: "Once Japan's interest rate hike lands, the drop will be a golden opportunity."

However, a serious review of the market performance during the past few interest rate hikes in Japan reveals a surprising pattern - the toughest market conditions almost never arrive on the day of the announcement.

Looking back at the interest rate hike dates in March and July 2024, and then January 2025, the situation is always like this: the day of the rate hike typically sees a rapid drop of 5%-8%, followed by a swift recovery. It seems that "bad news has been fully released", making it the easiest to attract those funds that want to buy the dip.

But the real trouble has actually just begun.

In the 2-4 weeks after an interest rate hike, the market enters a state of extreme consensus. Volatility significantly narrows, the center of gravity continues to shift downward, and rebounds lack strength. You won't see a sharp decline, but rather a slow descent accompanied by repeated horizontal consumption, with trading volume dwindling day by day, and sentiment being slowly drained like fibers being pulled apart.

This is not a market that gives people courage at all. This is a market specifically designed to wear away patience.

From the perspective of the graphical structure, the patterns are almost identical:

First, smash out a sharp "needle", then quickly pull back to create the illusion that the "bottom has already been solidified". Next, the price will rub repeatedly along the bottom of that needle, gradually wearing down the confidence of the bulls. It is not until the last wave of buy the dip funds can no longer hold on and exit the market that the situation can be considered truly digested.

Therefore, rather than saying that interest rate hikes are a "negative factor", it is better to say that they are a "temporal pressure". It is not something that can be resolved in a day, but rather it consumes the willpower of participants over a long period.

In this structure, the most vulnerable to being hurt are often not the aggressive types who chase after rising prices, but rather those who buy the dip too early yet lack patience – they are fully invested but miss the opportunity, and then are gradually worn down and forced out by the subsequent decline.

Instead of rushing to buy the dip, a more rational approach is as follows: stay calm when a rebound occurs and don't be greedy; gradually reduce short positions in a weak market and slowly realize profits; don't rush to switch to long positions until the trend is truly over.

The market is never short of those who dare to charge forward. What is truly scarce is the kind of trader who has the patience to wait for the market rhythm to complete.

If you are thinking about buying the dip right now, take a look in the mirror and ask yourself one honest question: After two or three weeks of continuous decline, sideways movement, and no rebound, do you really have the ability to hold on?

If the answer is negative, then don't try to prove yourself by being strong. Bottom opportunities never appear only once; true confidence comes from waiting.