The Market does NOT care about You!
Freehold
Date: 29/01/16
Time: 17:52:09
Post #: 16898966
Experiencing a Major Down Swing ...A true Story....
I had a friend who lived in Singapore who was a trader primarily (Ex accountant) in the hot sector of Tech around the year 1997-2000... He started small with 20-30k and was enamoured with Tech stocks...anything Tech. He traded extremely successfully... and was full of Bravado ...the phrase Bullet Proof comes to mind. He made money on good tech decision he made money and on bad decisions ... 30k turned into $3.8 million. He drove a fancy car lived in a fancy apartment had a high maintenance /cost Lifestyle and girlfriend... He went over and above and started leverage but only small to med amounts given the portfolio size. ... He bragged about how great a trader he was and how he had given up full time work forever... I was jealous ... seeking tips /advice... which he gave freely and enthusiastically.
Problem was he (and the rest of the world) was riding the crest of a giant wave but did not realise at the time. That Tsunami was the wordwide Tech boom ...The wave hit land and crashed in a matter of days / weeks...
End result was all tech stock he owned collapsed and in 3 months he was left with nothing but debt and had to sell all his assets to pay for it... could not even afford to pay rent at one point and had to return to Aust. given he had left his job for more than 18mth had difficulty finding a job, had to borrow more money from relatives to survive ...his health suffered, hit rock bottom ... slowly he clawed his was back to have a half decent job after a few years and cleared his debts.
The moral of the story ... Don't think about giving away your day job until you have survived and traded through at least one giant correction. I survived the Asian Crisis, the Tech Wreck ... but still got "pantsed" by the GFC as it was a different kind of crash... a growing Snowball of destruction as opposed to sudden Tsunami.
So a bit of objective self analysis is in order... is your Ego getting out of hand... if so then your showing the 1st danger signs ... you would do well to keep this behaviour in check because the next Tsunami will come as sure as sun will rise tomorrow... It might be early in 2016 or 2017 or 2020 who knows but it is coming ... We may be high on a crest right now or not who knows but not many will see it coming they never do??? But key is never over extend yourself and be ready to go to cash at a moments notice... If you are a hoarder of failed Short term trades and your bottom draw is filled Stocks deep in the red then you are future cannon fodder. If you have trouble cutting your losses early you are future canon fodder... I only store "Green" coloured stocks in my sock draw not red ones. And those stocks need to be growing "bright green"
TraderGT
Date: 29/01/16
Time: 21:57:25
Post #: 16900875
Very good discussion topic Free
Here are some quick stats - IMO of course
9.9/10 - Won't see a correction/beat market/crash coming if they haven't seen one before.....
9/10 - Won't see a correction/bear market/crash coming if they have seen one before!
This is some general thinking for a "newbie" in a bear market.....
I think many forget and don't understand a bear market isn't just straight down as a bull market isn't just straight up.
As you can see there was a period for 10 weeks in Mar-May 2008 were the market rose......this moments can make you think the nightmare is over but it made only be beginning!
I got done over in 2000 as I was only 19 years old and had no idea how low the market could go!
Key points
1. - DONT double down you could lose the lot
2. - Flight to safety - Most blue chips will lose 50% in a crash but make new highs within a few years, specs may lose 50% then 75% then disappear
Cycle of the markets
Lets start post a crash
1. - Recovery - Blue chips recover first and lead the market
2. - Sectors in the med caps will then lead growth, generally something different from the previous bull market
3. - Specs start running and particular sectors get very hot for 18-24 months
4. - Market peaks - you don't know at this point its happened!
5. - Unanswered questions bubble up
6. - Sentiment turns dovish
7. - Blue chips often commence the downward spiral then once sustained for a few months then liquidity in specs dry up.
8. - Market falls over 20% and a bear market commences, it will have moments when you think its turning, DONT be fooled and don't attempt to catch the falling knife.
9. - Volatility peaks and any good company announcement is sold into and all liquidity drys up, day trading is almost impossible at this point.
10. - Market finally bases (again you don't know at the time) and you roll back to point 1!
Just a simple Point process but that's what I have seen in 2000 and 2008.
The hardest part of a bear market.....
1. - You hooked on the market? Sometimes you need to walk away for Months or even year/s - However there is always something rising in a bear market - maybe gold......
2. - If you still keep your pants and some cash, the recovery can be very very profitable for you.....
To be a successful full time trader
You need to make more then enough in the good times/bull market to have plenty in reserve for harder times. Hence creating a nest egg for bear markets is important IMO.
So if someone can trade for a period of over 20 years and consistently make a living then they are a "gun" trader by definition. Not someone that can find a few winners in a hot market!
Final Point - Until you have been invested/ involved in a bear market you have no idea what your in for!
valen1828
Date: 29/01/16
Time: 22:40:52
Post #: 16901102
………………. There is something Frees not telling you and thats have some cash reserve or put some away for the event that no one knows about that hits the market . Even like ten percent cash in your under draw . That could be the one the that makes you through it .
Either that or you save money till the event and dont trade have like Forrest says reduced debt and wait for the crash and be comfortable you are not going enter unless your willing to hold .
My biggest mistake not holding after getting good entries thinking i can buy back in .No Knowledge of charting though ..Psychological barriers also come into play big time when the fight starts to hold onto your shares . ………………..
TraderGT
Date: 30/01/16
Time: 13:56:38
Post #: 16903441
………. its human nature and that is why the markets continue a similar cycle EVERY time
I agree the longer to have been around you become more watchful of changes in pattern and following the macro economic climate can assist also.
Some become over confident and just continue the same plan that has made them a lot of cash in the previous months/years (I did this in 2000). As many are so blind they don't fully realise the error of there ways till they have lost most of there gains or beyond.
Leverage can be the enemy of many.....I heard of a number of people already well off (I.E. mortgage paid off, living in a middle class suburb) they used Margin lending or re-borrowed against the house to invest in the Mid 2000's - many went bankrupt........Many with families.....The flow on effect is.......Marriage Breakups, change in lifestyle, Increased anxiety or mental health issues......and the worst.....I know of one person in Australia who committed suicide post the GFC.....his note stated he couldn't go back to living "like everyone else again"
We always here the good stories but rarely the bad......I think its important to ensure when trading you ALWAYS manage your risk so your investments aren't live changing in a negative way.
Always look after yourself and your family
Freehold
Date: 30/01/16
Time: 21:38:10
Post #: 16905316
In fact in bear markets you should be paying particular attention to those stock that seem to be resisting the pull downwards (showing uncanny strength where others in the sector are being punished) as those are the ones that will be the heros of the next bullish market leg. Find out why they are resisting the pull down, ID the FA reason if possible. Have your buy order ready for when the market swings back (maybe ...Like Friday/ Japan central bank Ann) and go as early as you can stand.
jeans_sammy
Date: 30/01/16
Time: 23:50:51
Post #: 16905814
Much of the things has been discussed and so won't make you bored. However just a couple of points:
We are human and so no matter how much we try, spend and put efforts in we will never be perfect and hence accepting mistakes and TRY not to repeat again will be the best possible outcomes for an individual.
IMO - in trading/investing; it's better to lose first than winning as it will train oneself to be a better investor/trader and will teach to spend/preserve hard/easy earned money wisely.
Starting from difficult time and in past 3-4 years time; I learnt that one needs the " PATIENCE & CONFIDENCE (on research)" more than money and education. I must have clear answer to why I am buying the stock either backed by FA or TA and combination of both would be much better. Will I be averaging up or down if price fall? How much will I able to put into this? How long or upto what profit/loss will I able to hold it?
kmac
Date: 13/02/16
Time: 11:37:23
Post #: 17011608
for every rule re the mkt there's another, or a qualifier as to how the rule applies. Agree lots of are fine but "only if"
Mark Douglas says;
"assume nothing, expect anything, be certain that certainty in the markets doesn't exist"
here's a few more "rules", gathered from a few traders over time;
An error does not become a mistake if you acknowledge it fast and take action
Trade them hard whilst hot and then when they cool..give them to others to hold
You do not need to risk picking the exact bottom to profit from a bounce
A rally is only tradable for as long as it lasts
Never argue with the market
Adapt to circumstances
...and fast to any indications of change
