Flirting with the bear market zone
已更新
Now that Dow Jones has officially entered into the bear market, we are left with SPX500 and NASDAQ to either follow or retaliate.
Trump has been accused of taking things too easy, refusing to get himself tested for the Covid 19, still saying everything is going well, nothing to worry about and carrying on his rally campaign , shaking hands with supporters as usual.
WHO has finally declared this COVID-19 as a pandemic now, sending more shivers to the already depressed market.
Now with all these negativity swirling in the air, what are you trading strategies now ?
1. Do you turn from trader to investor ? Trader usually have shorter time frame , from within the day(intraday traders), days to weeks (swing), etc. Investing tend to focus on longer time frame (months to years) and may include understanding the fundamentals of the company , like balance sheet, revenue, future of the industry it is in, etc.
So, if you have been using trading strategy and due to the recent sell-down, say you are down by 10%, are you suddenly extending your stop loss wider to avoid a real loss ? Are you consoling yourself that you are now an investor and in the long run, things will recover ?
Yes, market will recover , that is for sure. It is the when that we do not know and the holding power weakens over time as the price keeps dropping. I mentioned before waking up and seeing your portfolio in red is not only a lousy feeling, it also drives you to do things irrationally sometimes. Like calling it quits , cutting the losses once and for all so that you don't have to bear the pressures anymore.
This is what a retail trader really goes through and I know it is not easy. I had been there and can totally relate to that. It sucks big time. Like I said, trading is often a lonely business. You don't even get to talk to your buyer or seller,at all. Very straightforward, profit or loss. That's it. Nobody talks about your feelings, who cares ? And that itself is the biggest problem. When you have no one to talk to , you start talking to yourself even more. What you say to yourself matters more than before in this critical moment.
2. Review your position size
Say you have 3 open positions in SPX500 that you average up. Example at 3000,2850 and 2790.
At the brink of facing a margin call, you are better off reducing your exposure in this index. Buying at 3000 and seeing the price now at 2765 is painful. 80% of your losses comes from 20% of your holdings. And you already identified it. Depending on your capital, time horizon of investment, etc, it is better to cut the one at 3000 compared to 2790. Cutting the latter is like putting on a band aid on a still bleeding wound. It won't stop and neither does it make you feel better.
3. Stop loss - Do not attempt to widen your Stop Loss on your portfolio hoping it will rebound and not visit your stop loss level. This is like getting into business but being afraid to have no customers in the store. So you extend your opening hours hoping to attract customers. But at same time, you are also incurring costs like electricity, operating costs,etc.
Once your stop loss is determined from the start of placing the trade, do not adjust it anymore. If you are taken out, let it be. Cheap can get cheaper and realistically, how many times can you keep lowering ? You may escape one but you can't do it for all. STOP doing that and learn to face the reality. Bite the bullet and it too shall pass...........
4. Stop trading - If you are too stressed up with all this negative news on Covid-19 and find the current market too volatile, perhaps , it is good to stop trading for a while. Take a break and go do something else. Revisit your portfolio in 1-2 months time. This also helps you to reflect your trading temperament - how well can you really handle the pressure with real money at stake ? When it gets too hot, can you stand the heat ? Trust me, it takes practice. No point try to be hung-ho and go bashing the market , thinking you can turn things around. Many have tried and failed miserably. Trading is like trekking a mountain. The mountain is always there but if you are injured for whatever reason, descend and come back again stronger!
Feel free to write your comments, pm me if necessary if you feel this is way above what you can handle and I will do my best to help.
Remember, when the disciples of Jesus began panicking in the boat when they encountered the storm,they woke Jesus up. What did Jesus do ? He said, be still and know that I am God.
It means calm your inner storm, the fear, the anxiety (including possible job loss, health scarce, panic buying, income loss, etc), the stress, etc and know that you possess the wisdom and power of God too in your heart. Use this weapon to combat your situation.
Whatever it is , it too shall pass.............
Trump has been accused of taking things too easy, refusing to get himself tested for the Covid 19, still saying everything is going well, nothing to worry about and carrying on his rally campaign , shaking hands with supporters as usual.
WHO has finally declared this COVID-19 as a pandemic now, sending more shivers to the already depressed market.
Now with all these negativity swirling in the air, what are you trading strategies now ?
1. Do you turn from trader to investor ? Trader usually have shorter time frame , from within the day(intraday traders), days to weeks (swing), etc. Investing tend to focus on longer time frame (months to years) and may include understanding the fundamentals of the company , like balance sheet, revenue, future of the industry it is in, etc.
So, if you have been using trading strategy and due to the recent sell-down, say you are down by 10%, are you suddenly extending your stop loss wider to avoid a real loss ? Are you consoling yourself that you are now an investor and in the long run, things will recover ?
Yes, market will recover , that is for sure. It is the when that we do not know and the holding power weakens over time as the price keeps dropping. I mentioned before waking up and seeing your portfolio in red is not only a lousy feeling, it also drives you to do things irrationally sometimes. Like calling it quits , cutting the losses once and for all so that you don't have to bear the pressures anymore.
This is what a retail trader really goes through and I know it is not easy. I had been there and can totally relate to that. It sucks big time. Like I said, trading is often a lonely business. You don't even get to talk to your buyer or seller,at all. Very straightforward, profit or loss. That's it. Nobody talks about your feelings, who cares ? And that itself is the biggest problem. When you have no one to talk to , you start talking to yourself even more. What you say to yourself matters more than before in this critical moment.
2. Review your position size
Say you have 3 open positions in SPX500 that you average up. Example at 3000,2850 and 2790.
At the brink of facing a margin call, you are better off reducing your exposure in this index. Buying at 3000 and seeing the price now at 2765 is painful. 80% of your losses comes from 20% of your holdings. And you already identified it. Depending on your capital, time horizon of investment, etc, it is better to cut the one at 3000 compared to 2790. Cutting the latter is like putting on a band aid on a still bleeding wound. It won't stop and neither does it make you feel better.
3. Stop loss - Do not attempt to widen your Stop Loss on your portfolio hoping it will rebound and not visit your stop loss level. This is like getting into business but being afraid to have no customers in the store. So you extend your opening hours hoping to attract customers. But at same time, you are also incurring costs like electricity, operating costs,etc.
Once your stop loss is determined from the start of placing the trade, do not adjust it anymore. If you are taken out, let it be. Cheap can get cheaper and realistically, how many times can you keep lowering ? You may escape one but you can't do it for all. STOP doing that and learn to face the reality. Bite the bullet and it too shall pass...........
4. Stop trading - If you are too stressed up with all this negative news on Covid-19 and find the current market too volatile, perhaps , it is good to stop trading for a while. Take a break and go do something else. Revisit your portfolio in 1-2 months time. This also helps you to reflect your trading temperament - how well can you really handle the pressure with real money at stake ? When it gets too hot, can you stand the heat ? Trust me, it takes practice. No point try to be hung-ho and go bashing the market , thinking you can turn things around. Many have tried and failed miserably. Trading is like trekking a mountain. The mountain is always there but if you are injured for whatever reason, descend and come back again stronger!
Feel free to write your comments, pm me if necessary if you feel this is way above what you can handle and I will do my best to help.
Remember, when the disciples of Jesus began panicking in the boat when they encountered the storm,they woke Jesus up. What did Jesus do ? He said, be still and know that I am God.
It means calm your inner storm, the fear, the anxiety (including possible job loss, health scarce, panic buying, income loss, etc), the stress, etc and know that you possess the wisdom and power of God too in your heart. Use this weapon to combat your situation.
Whatever it is , it too shall pass.............
注释
If it makes you feel better, put the blame on President Trump, haha. I am just kidding. The sell off continues.........Now all 3 major US indices are in the bear market officially.
注释
edition.cnn.com/2020/03/27/politics/fauci-trump-easter-coronavirus-pandemic/index.htmlUS needs the consumers to spend money to resuscitate the economy and he is hoping this Easter day would be the catalyst. He is not entirely wrong but he fails to see the bigger picture of people getting unemployed (already the alarming, shocking jobless claims figures are evidence), retrenched and loss of jobs. When consumers pull back on demand, suppliers/companies will cut back on production - supplies and that in turn can cause recession. And in turn Fed come in to pump money into the system, a vicious cycle.
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