If there is one cardinal rule of thought that traders and investors need to immediately put deep into their psyche and practice is that professional traders ALWAYS FOLLOW TREND , and make immediate investment decisions based on that criteria.
AMATEURS try to pick bottoms, and counter trade against TREND. Under normal circumstances that is a recipe for trading ridicule, loss, and continued self inflicted damage.
In this market, it is a recipe for bank wipe out, and a trip back to the dairy farm to milk the cow.
Do NOT EVER try to think you are somehow more gifted and intelligent than the market. The TREND in this market is SHARPLY DOWN.
Thus one should be looking for opportunities on the SHORT SIDE of the market, or staying the heck out of the market until the TREND CHANGES, and a real BOTTOM is ESTABLISHED.
To speculate about where you think a bottom will occur is just plain fools gold. Sure, you will occasionally guess it right, but really, honestly.. why try to do that. If past history is any guide, you will be WRONG 9 times out of 10.
With current VIX Levels Above 35 , this is NOT THE TIME to go bottom fishing in this market.
Be a professional. And trade like a professional. Your self esteem, your worth and your trading account balance,will thank you, if you do so.
I agree that we mustn't attempt to time the market by trying to pick the bottom. However, being short when the market is already down some 15% is very risky. Short squeezes on sharp rebounds up can kill a short trader, because upside loss is unlimited. Over the past 10 years there have been many bear traps that have tricked shorters into losing a lot of money because they went with the short-term trend (down) instead of the long-term trend (which is up). Right now, the short term trend is down. But no one knows when it will end. It could have ended already. The safest thing is to stick with the long-term trend, and stock markets have a bias to the upside over the long term. Trying to trade a short-term trend is in effect trying to time the market, which is never accurate. Personally, I like dollar-cost averaging, buying every 2% down and selling every 2% up. You end up selling at the highs and buying at the lows automatically. With dollar-cost averaging, we don't have to try to pick a bottom or a top. DCA automatically finds the tops and sells into them, and automatically finds the bottoms and buys into them. All we need to do is make sure we space our buys out and have enough cash to make all the purchases and we're find. Then, on the next up leg, we have more profit than we had before.
I would consider professional traders those who trade the market every day for a living
THEY REACT the PRICE MOVEMENT, AND IN THIS CASE either cover short positions and go flat,
or immediately enter long positions on a bullish breakout identified on the chart. ( Different trader's, different time horizons)
garyfung
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@The_Unwind, I was long and you were short. You were clearly wrong so just admit it. I'm not always right, and blew up trades before but I scored by buying big on Monday when I drew this:
garyfung
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I noted 2335 should be bottom before rebounding. Today, it rebounded without getting there, though ES1 futures did go there (and lower). I'll sell on wave 4 retracing .318 of (3), targeting 2476
Fractal777
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@garyfung, Well done Sir....eagle eyes and instinct!.
MrRenev
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@garyfung, Professional traders try to make money, amateurs call falling knifes and try to be right. You hear them say how right they are the few times they win, they remain silent when they take big losses all the time.
garyfung
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@MrRenev, this has nothing to do with falling knifes. I showed you my chart. Your chart was wrong, mine was right. Only amateurs don't admit their mistakes.