[Red Envelope] Stock Addict's Notes: Invincible Quantitative Trading? A Complete Guide to Using Quantitative Methods to Navigate Hellish Market Conditions!

The Coldest Days Are Coming, A New Week Begins. Today, I won’t hold back—let’s keep talking about trading machines, teaching everyone how to pass through this hellish market with the “correct posture”! Remember to like, follow, and give a triple support with one click—no free rides~ [Taogu Ba]

First, over the weekend, various pessimistic sentiments emerged. Some teachers shouted about quantitative strategies cutting me badly! The fall of hot money! All kinds of quant strategies are invincible! Then more opinions appeared, but in reality, the toughest market periods each year are always met with similar words—just that before and after the Spring Festival, poor market performance leads to mutual comfort, excuses to boost traffic. Those truly successful traders have long been quietly studying the “motivation for their crimes” in quant strategies, trying to develop an effective trading system based on quant methods, rather than just complaining about the unfair world. If there are flaws, why not leverage strengths and avoid weaknesses?

So today’s main post isn’t really about review points, but about how, within my system, if we keep passing through this weak market before and after the Spring Festival, how to profit when others are being harvested by quant strategies—maximizing the anti-human nature aspect of our approach is the key focus!

Quant Strategy Characteristic 1: Buy on Divergence Rotation, Sell on Consensus Reversal
Take Tuesday’s example of Demingli, a clear pattern focus. Because we know the inertia of quant strategies is “assist in rising and falling,” the stock selection aesthetic is similar to many traders—always rotating in old cycles like storage, computing power, electricity, chemicals, oil and gas. From last Friday to Monday, the index sharply adjusted. During the retreat of market sentiment, which sector defies the trend and strengthens?

“Storage chips?”
So, if we follow the quant rotation logic, on Friday and Monday, storage chips surged strongly, establishing a trend. On Tuesday, divergence appeared—should the weak not be weak? That becomes a key point for quant to scoop up chips. Is there a big rotation possible the next day? Because the inertia of quant strategies is that stocks adjusting today might rotate sharply tomorrow, and stocks that surged today are immediately cashed out the next day. Therefore, all storage chips like Demingli, Baiwei Storage, Shannon Chip, Zhaoyi Innovation, Jiang Bolong, Langke Technology, all saw big gains on Wednesday. But what about the next day?
“The quant cash-out rule is revealed!”
It’s clear that Tuesday’s divergence is the focus for storage chips within our model. Once the rotation flows back on Wednesday, it’s the point of realization within the pattern—this is one of the secrets of exploiting quant inertia!

On Tuesday, risking to buy on divergence when 4,000 stocks are falling, and calmly holding the next day is a 5-10cm move. But if you wait until Wednesday’s rotation before buying, you risk buying at the top, starting with a big loss—possibly a limit-down. That’s the gap. According to our system’s rule of “buy on divergence, sell on recovery,” Tuesday is the clear opportunity day; even if Wednesday’s index rises to 4,500, it’s the day of realization!

Quant Strategy Characteristic 2: Triggering the Realization Factor as a Pre-Exit Signal
When does quant realization happen? If you don’t understand this, believe me, during the Spring Festival market, you’ll be late to the limit-down, or even experience multiple hits. If you want to pass through like within my system, avoiding every wave of limit-downs, you need to seriously learn today’s lesson. Otherwise, quant strategies will smell the “chives” and immediately cut you down!

1. The hot sector on the day is prone to trigger batch realization the next day
Like Monday’s CPO, Tuesday’s collective -10% drop, Wednesday’s storage chips, Thursday’s Demingli near limit-down, Thursday’s computing power, Friday’s Xiechuang Data, Hongjing Tech, Dongfang Guoxin, etc., all fell around -10%. Even the Thursday surge in computing power and other sectors was a trap—early morning limit-up, then smashed down to -3% by close. The best response is to follow the system’s logic: on Tuesday, dare to focus on rotation during divergence; on Wednesday, dare to sell during the recovery. You can miss the move or sell early, but don’t lose money!

Of course, if you think that the four consecutive days of ice on Wednesday show a bottom feature, what if it’s just a volume-reduced stop and rebound, and the next day it continues to recover with increased volume? The core principle of “risk control during pullbacks” is actually “position sizing.”
Because until the index hits a bottom, it’s hard to confirm the medium-term bottom unless the “index hits bottom + US-Iran situation clarifies” both happen. Otherwise, it might rebound 1-2 days then quickly break down again, starting with a big loss—possibly a limit-down. So even if we see signs of stabilization on Wednesday, if the US-Iran situation remains unclear and might influence the decline, we need to “control positions.”
For example, on Tuesday, trigger the system’s pre-ice point focus, then fully allocate to core storage stocks like Demingli, Baiwei Storage, etc. On Wednesday, as the recovery occurs, but the quant rule remains unchanged, and the US-Iran situation is still unclear, just watching the index’s apparent stabilization, you should take profits on storage stocks at high levels, secure your gains, and cautiously explore other sectors like technology or commercial aerospace. If the next day the index doesn’t meet expectations and doesn’t stabilize, you should exit without hesitation.

This way, you can take a large position, possibly gain nearly a limit-up move, and not miss the potential bottom. Even if the next day you lose 3cm, you’ve already pre-controlled a quarter or fifth of your light position for testing. In such harsh markets, even if you’re wrong, the retracement is only 0.6-0.75%. If it triggers a breakout, you can further increase your position. Comparing profits from previous periods, you’ll find you’re more relaxed and confident! This is the core of “risk control and position sizing.” Have you learned it in front of your screen?

2. Sector performance below expectations + strength or weakness easily triggers quant “踩踏” (stampede)
Looking back at this week, most sectors started poorly at the opening, with stampedes during the session. For example, Thursday’s sharp drop in Meiliyun’s computing stocks, which nearly hit limit-down, but on Friday, the core stocks had almost no premium and no expectation of exceeding expectations. The sector also showed negative feedback, and during the day, stocks like Cunchuang, Hongjing, triggered quant realization and stampede.

Similarly, on Wednesday, the peak in storage chips, and Thursday’s opening below expectations caused quant realization and stampede. Demingli’s nearly 80 billion market cap almost hit limit-down. The same applies to the aerospace sector, which seemed weak but was actually strong—market attention was on the development of aerospace, which was resilient. The entire day was a downward adjustment, hitting near new lows at close, and Friday was close to limit-down again! Now you understand the value of buying on divergence and selling on recovery, right? This market is profitable if you act accordingly. Don’t listen to other teachers’ nonsense—by the last moment before the Spring Festival, your account was still losing money.

3. Technical bottom + consecutive rebounds easily trigger quant “作案” (manipulation)
We’ve discussed this many times. Previously, we shared that when the technical bottom appears within the system, daring to buy when 4,000 stocks are falling on the same day, and then seeing a big rebound the next day—sometimes even 5,100 stocks rising at the opening—this rhythm was very comfortable before last week. It was a key anchor for our precise counter-trend navigation before the Spring Festival. But last week, we discussed that the technical bottom no longer applies because the trend is accelerating to a top, and the market might turn downward. Looking back, most of the time from last week to now, the index has been in a downward wave + 4,000 stocks falling.

But is there no way? No, since the market is extreme, we should be more extreme! If the technical bottom can’t hold, then can the first extreme dip below the bottom trigger a quant signal?

So, on Tuesday, if the technical bottom is broken downward + the market hits three consecutive ice days, it’s a good time to attempt a core trend short. The next day, rotation is likely! When Wednesday’s recovery occurs, it triggers the system’s climax exit signal!

Moreover, the best results often come from the “first” occurrence. The first time the technical bottom appears or is broken within the system yields good results, but as it repeats more times, investor fatigue and diminishing marginal benefits set in.

For example, before the Spring Festival, the first technical bottom resonated with the system in Wangsu Technology, and right after the holiday, the first day of international composite materials, the 3.4 ice point in Yunnan Energy, and Huagong Tech showed no problem with sustained growth. But two weeks later, sectors like aerospace and Demingli, which were focused on the bottom, quickly recovered and then needed to consider taking profits—only holding for 1-2 days for quick in-and-out.

4. Index structure top + bottom easily trigger quant “作案” (manipulation)
This is a signal we’ve always shared. Looking back, it seems I’ve shared every core point publicly before. But whether you’ve listened or acted, it’s a key indicator that widens the gap during this weak market. For example, the recent “box structure”: top at 4150, bottom at 4100. When the index approaches the top, around 4150, it’s prone to quant realization; at the bottom, around 4100, it’s prone to quant activity. During this cycle, daring to buy at the 4100 technical bottom during the box’s bottom, and selling at the 4150 top during the climax, can yield big gains.

Because the big structure determines the small opportunities and risks! So, when the 3.4 technical bottom + box bottom occurs, it’s very easy to trigger quant reaping. When the index drops to 4100, be brave to attack; looking at Huagong Tech and Yunnan Energy’s explosive moves, it’s not so hard to catch. Last Thursday, the index returned near the 4150 top, with a surge in electricity stocks, signaling trend acceleration. Thursday was a standard rebalancing and realization point. Last week’s decline from Friday to this week’s Friday, with the wave down + the retreating limit-down tide, has nothing to do with you. Others were stuck for 6 days, but if you understand, you can rest for 6 days and outperform many experts—even top funds you admire!

Because in these six days, the market was like this!

So, some students said over the weekend: “Wow, it’s really hard to turn the account green before and after the Spring Festival!”

Yes, it’s very hard. To turn your account green in this environment, you need to do what? Or, how deep is the internal competition?!

1. Completely avoid the retreat: Exit before the tide on last Friday and Monday, even rest from last Friday to this Friday!

2. Pre-judge panic and small ice points, catch the market rotation style, buy on divergence; on Tuesday, dare to focus on storage chips (like Demingli).

3. During a strong market, take profits during consensus, stick to your objective rules: for example, on Wednesday, tech stocks surged as expected, and Demingli was taken off during consensus. On Thursday, aerospace sector continued to be weak, but the development was resilient—market attention on aerospace, which was strong. The entire day was a downward adjustment, hitting near new lows at close, and Friday was close to limit-down again! Now you understand the value of buying on divergence and selling on recovery, right? This market is profitable if you act accordingly. Don’t listen to other teachers’ nonsense—before the Spring Festival, your account was still losing money.

4. Low-frequency + position control + drawdown management:
Last Thursday, pre-emptively rested to defend until Tuesday. On Tuesday, dared to increase positions during the ice point (storage stocks). After recovery on Wednesday, immediately reduced to light positions to probe the bottom, aiming for big gains and small losses. Achieving small profits without losses ensures steady compound growth.

Finally, in the environment where the index drops to 4,800 and breaks the extreme ice point, if you act, you might see a rebound, but it’s very competitive—be cautious of the lagging points. If this pattern continues daily, every evening could be a buy point, and every morning’s opening a sell point—repeated arbitrage!

In the end, how to tell if it’s really the bottom? Is the market temporarily returning to normal or just a trap? Here’s a practical tip from the dirt pile!
Notice the recent decline starting last Friday, with countless heavyweights like banks, insurance, oil & gas, tech, energy storage trying to support the market, but the index kept falling after each false rally. The market’s real support isn’t weightings, but spontaneous sentiment! When sentiment shifts from weight support to emotional support, that’s when the market temporarily normalizes!

So, even if the gap at 3983 is filled on Friday, is there resonance? Have you seen a big decline that can resonate? No, right? Because a big drop like that rarely resonates. If the recovery on Monday needs to be the first sustained strength and resonance, with continuous sectors, then the core sentiment hinges on whether Huadian and GCL-Poly can break through highs, and whether GCL’s afternoon rebound can continue. If the rotation is just fan-driven and sentiment lacks spontaneous support, and US-Iran tensions remain unclear, then all talk is just to deceive P!

Data summary:

Number of rising/falling stocks: 662 / 4786
Number of limit-ups: Thursday 28 / Friday 28
Limit-up rate: Thursday 72% / Friday 53%
Number of limit-downs: Thursday 5 / Friday 13
Total market turnover: 2,303.1 billion, up 175.62 billion from the previous trading day

This kind of detailed analysis, review + intraday sharing, is unique—others can’t see it. If you feel my sincere effort, just give a like, follow, and support with one click—no free rides!

If I evaluate the pattern performance before and after the Spring Festival, I’d say: “Slow but steady”—early recognition of the ice point, safe and solid before the storm.

Low-frequency trades 1-2 times a week to ensure high win rate. Even if before the festival, you used the bait of false rallies, and many stocks hit limit-down, you can still avoid pitfalls and pass through extreme conditions with core stocks like Wangsu and Saiwei Electronics. After the festival, the first day’s international composite materials, the bottom trends in aerospace, the 3.4 ice point in Huagong Tech, Yunnan Energy, and the early rest to avoid the retreat last week—these are all opportunities to dodge risks. The hardest part is learning to wait, because waiting is harder than trading. Controlling drawdowns is more important than chasing profits. Staying alive is the key to compound growth. All your anxiety and confusion come from not being in cash during the retreat.

Flow doesn’t compete to be first; it competes to be continuous. The overall pattern before and after the festival feels good—perhaps the wisdom isn’t as good as those who can follow it. The purpose of sharing this mental method is to help everyone avoid risks and grasp the ice point, so you can better respond to different market phases. Most big pitfalls and false rallies won’t trap you; instead, you’ll hold stable opportunities, calmly rotating at high levels.

Next week’s end-of-month market will continue low-frequency to ensure win rate. Patience in the short term for long-term calm; a solid system to counter luck’s fragility. If you agree with this philosophy and want to systematically improve your cognition and build a sustainable trading system, this journey is one of selection and resonance. Those with fate will find the way; those with purpose will act. If interested, pay attention to the timing~

Wishing everyone a steadier, farther journey on the path of long-term investing.

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