1. Denial: "We're still in a market!"
2. trap: "BTD!"
3. Fear: "Hmm macro a lot worse, also Trump for president..., should i... what if... uhhh... uhhh... aaaaaah...!!!"
4. Capitulation: "NOOO! market, time to sell. Or do i just hold and sit this out?"
5. Despair: "I wish i did not held and i wish i had closed my positions. Sh-.."
6. Return to "mean": "Institutions here to buy your stocks you held and are now dumping for cheap. Thank you, come again."
Knowing this, we're going to do the following to not blow up our accounts:
1. Denial -> Acceptance: It's ok that the market is over. Acceptance is phase one in trading and live.
2. trap -> Patience: Wait with the heavy short position until there is a lower on weekly or monthly. Plenty of time to build a short position with a nice entry. You don't want to get run over by the trap. Once the trap tops, heavy short it.
3. Fear -> Relax, all is fine, live is good: Ride the fear. This is where we make our money. Expect to let the shorts sit for a year or so and account for this duration.
4. Capitulation -> Profits: Enjoy the ride and start taking some profits once it capitulates.
5. Despair -> More profits: Continue shrinking your short position and start building a long position. Stocks are for sale.
6. Return to "mean" -> BTD: Congratulations. You have closed all your shorts, picked up cheap stocks and you have survived a market. Time to BTD again.
Maybe this is just a correction and a false flag market, but at least you'll be prepared when it comes!
* MA 364 is seven times weekly moving average of a year (7*52 weeks)
** Like this chart? Feel free to give it a thumbs up!