“I will never buy at the bottom or short at the top, but I will make my money in that 60% area” JP Morgan
No one ever gets to short or sell the top and no one ever really gets to buy the bottom. Sure it happens, but it is usually attributed to a modicum of luck. The canyons of Wall Street are littered with ghosts that tried and failed.
The rhythm and momentum of this particular market makes it easier for traders to get caught at tops though. Some folks bought gold, silver and energy at the top, not thinking it was the top. They may have had intentions to wait and buy the pullback, but “crowd mentality” and inherent greed takes over and they get bagged. Getting bagged on occasion is part of the game. Fear and greed make the market. It’s all good, it’s just how you manage emotion and risk.
I am opining on this topic because part of my own approach to trading is to buy strength and to short weakness, so this leaves me wide open to reversals that can happen quickly. It often times involves me buying 52 week, or all time highs, or shorting lows. I don’t buy these tops or short these lows because I am “chasing”, there is a difference, I buy these levels because strong buying usually brings in more buying and strong selling usually brings in more selling. Look at the hard rollover we are now seeing in the commodity space, you may have thought the selling had abated earlier in the week, but it was just a pause as lower prices on big volume hit hard.
Hindsite (or the woulda-coulda syndrome) can be a killer to a traders psyche. It happens to me a few times day. Silver and oil are great examples of the hindsite trade. Many missed the initial move, so regret and angst take over the trade, not logic. What happens? A revenge trade develops. The “I will teach you to run 30% without me” trade sets up. You become a buyer at the wrong spot, the trade was emotional not tactical. You usually lose under that scenario.
Good trading.
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