We’ve had a pretty wild morning so far with a furious rally followed by a quick fade. That kind of action is why I make use of the moving averages on the NDX chart. (as I described the other day) It felt like a strong move but my rules kept me on the sidelines because the moving averages were (and still are) in a bearish posture (slower average above the faster one).
There’s nothing special about these particular moving averages (5 and 10 period exponentials). The key is to pick one (or some) and use them consistently. As the chart shows, the market tried to hold above the 10 EMA but fell back. Even if it had kept going higher my rules would have kept me out until the averages were able to cross. Judging by how widely spaced they were such a crossing may have taken another hour or so.
Of course this method doesn’t always work out so well. I still get caught in my share of head-fakes and even miss a few moves when the market just keeps bolting higher. But it keeps me out of trouble more often than not.
So I’m still in cash waiting for some setups to appear. I agree with Howard, who questions how these type of opens will ever flush out the last of the sellers. I’m going to wait until after 2 PM to see if the bulls start puking up stocks. It doesn’t look like that’s gonna happen and therefore, I feel no incentive to do anything. But let’s see how the next couple of hours go. Maybe the margin clerks will get busy over lunch…
Mike,
Thanks for your posts. They are learning experiece as this times are.
I have been trading long last year (very well indead) and a couple of months ago started doing some swing trading. To make things short, I did not repect my limits (as I thought I bought too low) and the truth is it is hurting (both in my wallet and psicologicaly.
It´s not fair to ask, but do you think (feel) we have bottomed or is this thing going even down? Should I accept my losses (which by today are a lot) and wait for calmer times, or should I stay long if I believe in the companies and the trade?
It is hard to figure out what to do, and maybe it was bad timing to decide to live out of trading, but this is how things are and one has to accept reality!
Yours,
Daniel
Daniel V: “It´s not fair to ask, but do you think (feel) we have bottomed or is this thing going even down? Should I accept my losses (which by today are a lot) and wait for calmer times, or should I stay long if I believe in the companies and the trade?”
I feel your pain Daniel – I’ve been there before. The thing is, trading is not about predicting the markets. To put it simply: You should simply trade your view, either bullish or bearish and exit once your initial indicators are not favourable of that view anymore or when you’ve reached your profit target.
And Mike: It would have been great the short sell the index; here in Australia, our markets have followed suit with the current losses of the American markets.
Thanks Marco,
I know that is the “right” answer though one cannot accept that losses when one doesn´t understand the market. I, for once haven´t accepted what I have been seeing this past five days and have been always hoping for a rebound but I know thta was wishfull thinking.
Now that the losses have been taken I don´t know whether to wait for a rebound or just exit.
Thanks
Daniel
Daniel,
I wish I could answer that for you. One the one hand, I would hate to be a seller with the market so oversold — T2108′s finally below 20. But on the other, who knows when or by how much the market will bounce. And then, who knows if and how much your particular stocks will bounce.
I alwasy tell people that you don’t have to make your money back in the same stocks. Sometimes it’s just better to go back to cash so you can think with a clear head. What’s more, you can free yourself from (potential) laggards and catch the big movers from the next move of the market.
Good luck.