The Essence of Ultra-Short-Term Trading

I define ultra-short-term trading as T+1 or T+2, meaning buying today and selling tomorrow or the day after. The essence is chasing stocks that can surge significantly or achieve consecutive limit-ups to achieve rapid profits. The operational process involves reviewing the market, selecting stocks, setting a plan, deciding to buy or pass, and exiting if the stock doesn’t hit the limit-up the next day—repeating this cycle.

So, what is the true essence of ultra-short-term trading? It boils down to three words: don’t lose. Some might laugh and say, "How is that possible?" Let me explain. Here, "don’t lose" means avoiding large drawdowns. How do you avoid large drawdowns? Follow these three rules:

1. Quick In, Quick Out. You buy today and sell tomorrow. Theoretically, the maximum loss is 30 points (for limit-up plays on the main board; I don’t trade 20cm limit-ups, so this is my limit). What are the odds of encountering this? Maybe you catch three consecutive limit-ups for a 50-point gain, then take a -30-point hit—you’re still profitable. So don’t worry; as long as you’re quick in and out, there’s no major drawdown risk.

2. Avoid Potentially Risky Stocks. For example, stocks that have already risen significantly with high turnover for several days, or those with earnings risks, fraud risks, etc. In short, avoid anything with negative potential. Skip it today, or take a break for a couple of days—why not?

3. Set and Strictly Follow Stop-Loss and Take-Profit Rules. My usual stop-loss is -10 points, and take-profit is 20-30 points, but I start reducing positions at 10-15 points. This depends on the situation. For instance, with Jin’an International, which had a one-word limit-up yesterday, I didn’t reduce at 20 points. Today, I trimmed at a 21-point profit—no regrets about not waiting for 30 points. A calm mindset is the foundation of profitability.

Beyond controlling drawdowns, here are a few more points to note:

1. Develop Your Own Strategy. Stick to the method you’re most familiar with and can consistently profit from, such as weak-to-strong reversals, first limit-ups, 1-to-2 transitions, end-of-day plays, first pullback of leading stocks, second waves of leaders, or oversold bounces. Once you have a strategy, commit to it, refine it, and avoid distractions.

2. Find Your Own Rhythm. This rhythm reflects your understanding of the market. For example, different phases of the sentiment cycle suit different traders. Some strategies thrive when new concepts emerge, others excel during catch-up rallies, and some specialize in oversold rebounds. Identify your profitable phases over the years, analyze them carefully, and solidify your rhythm.

3. Learn to Rest. True masters of ultra-short-term and short-term trading know when to rest—after big wins, after two consecutive losses, or when anticipating high-risk market conditions. Those who don’t rest and trade daily are either like me (writing articles and refining quantitative models), professional traders, or—mostly—amateurs. Forcing trades often leads to mistakes. Only trade when you’re confident, and wait for opportunities instead of trading daily. Statistically, daily trading has a loss probability of over 50%, and over 80% in bad markets—unless you’re a genius.
   
   

In summary: Ultra-short-term trading requires preventing drawdowns, learning to rest, and constantly summarizing and reflecting.