Is there any way you can completely remain safe from taking losses in the market? No, but you can certainly pare down the odds and make it much more in your favor. Similarly, it is foolish to think that you can not make money in virtually any market environment. If you look at leadership, good patterns and time your data well even in a raging bear market you still long to go successfully.
Obviously, that is "fighting the tape" right? Absolutely. It would be more profitable during a down market period and easier to do. Brief We have many readers who just will not go short or buy "put" options. So we try to show that if you are careful and do your homework, you can go into a bear market long. However, the control of the belt is the wrong way to go. So, for the first episode of our mini-series, let's look at the tape, and where it comes from.
First, we must be aware of the overall market "trend" and we want to take to clear up what a trend really is a moment. Remember a few days up is not a bull market is not more than a few days down signals a crash. Markets go up, markets go down. Our main priority is to try to figure out how they go for the longer term, not just tomorrow. There is a "general trend" as the downside we've seen in the NASDAQ over a year, and then within that general trend is smaller 'mini' trends. For example, the lows hit on April 4, 2001 to about June 5, 2001 were a "mini" uptrend. The NADAQ gained something like 40%.
Let's assume that we are looking at a scenario like this: We are warnings season and the market is really nasty. Volatility prevails, and we trade sideways to down. Then finally start to dry, the warnings and they focus more on perceived "good news" and starts moving again, the actual earnings season. Market up Then after the profits of the market settles back and floats lower. Now, mid-August and we are at the same levels of the averages that we had when we started. What was the trend? See, there really was no "overall market trend." We were basically directionless and getting tossed on news, hopes, fears, anticipation etc. But during those periods of revival and downswings, there were "mini" form trends.
It's that mini trends that gain or loss for the investor or the short term produce merchant. Get on the wrong side of that mini-trend if the market falls and you are locked into losing positions that could get really expensive. Also go short as the mini trend is "up" can add to your head quickly. Few gray hairs So naturally, can identify the mini trend is the first step in safe play. If the trend in the short term, all semblance of "down" then you do not want to be loading your boat with longs. Of course you can still pick out the leaders and pimples, but you must be very fast and very stock specific. None of this "buy em all up" mentality.
On the other hand, if the mini trend is up, you do not hold a ton of shorts, or missing the boat by only having a stock in your shopping basket. Both are costly mistakes. So, again, track a safe play on will always be to try and put yourself on the right side of the band. Long in a mini bull trend, briefly into a bear mini-trend. Remember the old saying, "only salmon swimming upstream, but then they die." Also fight the tape is a difficult way to go. So how can we find and identify these small trends? Certainly it is our job to try and weed them out for you, but you should do your own homework. What we use is support / resistance lines, general "mood" of the market, and significant changes as interest rates, earnings seasons, etc., all lead to the formation of mini trends.
Get more info like this on:
No comments:
Post a Comment