Here are a few random observations virtually markets, trading, together with life inspired yesteryear a cool Jackson, WY morning:
1) At the recent arts and crafts beer gathering I hosted, J.C. Parets–to my surprise–made a strongly bullish representative for stocks. I told him inward no uncertain terms that I was bearish. The conversation stuck alongside me because I heed to smart people. A good for you lot grade of self-skepticism is a expert thing: the greatest losses come upward from drinking also deeply from one’s Kool-Aid. J.C. spelled out his bullish case–his challenge was: what sector is breaking down?–and I took that to heart. Since that time, I’ve withal traded the bear side, but I’ve been quick to conduct keep profits because I haven’t seen a wholesale breakdown. Was I right inward my downside leanings? Yup. Was J.C. right virtually underlying strength? Yup. On Fri nosotros unopen alongside 541 stocks making fresh monthly highs. That’s the highest number inward over 2 weeks. We also unopen alongside 754 stocks making fresh monthly lows. That’s the highest number inward almost 2 weeks. It pays to heed to smart people: if smart people disagree virtually the market, peradventure the answer is to merchandise nimbly.
2) Another smart marketplace observer, @ivanhoff, points out that corrections inward bull markets frequently occur through sector rotation. It makes sense: when involvement rates plow a corner, to a greater extent than or less industries together with companies volition live adversely affected; others volition benefit. High-yielding utility shares conduct keep been relatively weak; banking issues conduct keep been relatively strong. We’ve been correcting, but through rotation. That’s non how bear markets behave.
3) I expose it useful to follow the tweet current later big information releases together with parse the signal together with the noise. @RedDogT3 is to a greater extent than or less other i of those smart guys I heed to. His focus on banking concern stocks later the Fri number made lots of sense.
4) I constitute happiness inward a romantic human relationship when I finally got it into my thick skull that what I needed was no drama. None. Zero. All the things I had told myself virtually moody people existence somehow deeper together with to a greater extent than complex were hogwash. Moody people, for me, were tiring. Even now, I start to read an electronic mail or tweet high on the emo scale together with I’m reaching for the block button. A major footstep inward my trading was coming to the same realization. If I await for the right things to business upward together with boundary myself to signals alongside a demonstrated edge, my sense is far to a greater extent than rewarding inward the long run than going through the ups together with downs of trading less selectively. Sizing upward when you lot conduct keep something rattling reliable that you lot know rattling well: non a bad formula for relationships together with trading.
5) After a menstruum of trading actively, I had to halt trading altogether from 2010 through lastly yr due to compliance regulations at the hedge fund where I worked. That was also the menstruum inward which I had to footstep dorsum from blogging. Since returning to trading, I tin tell that markets are to a greater extent than hard than when I left inward 2010. At root I idea it was merely me, together with that I was rusty from my fourth dimension away. But it was to a greater extent than than that. I encounter many to a greater extent than abrupt marketplace moves on precipitous flows that volition conduct keep prices uncomfortably beyond recent highs or lows. Maintaining a good for you lot skepticism on seeming breakout moves has been adaptive. I conduct keep benefited greatly yesteryear going alongside marketplace trends together with yesteryear patiently waiting for counter-trend moves for entries. One of the best emotional indicators telling me to stand upward aside is fright of missing a marketplace move.
Further Reading: A Theory of Romantic Relationships