Registered: Jan 2012
02-07-12 10:40 PM
Quote from wiesman02:
Every single time this market attempts to sell off, you have buyers stepping in and pushing the market back up. Every time we've been threatened with a 1% down day, we rally back.
In addition, bull markets are classic for tricking newbie traders like yourself into thinking the market is overextended because its gone up more than you think. You short, and the market goes up another 10 to 15% and you scream overextended all the way to bankrupt! Classic bull market. Its happened to me plenty of times, but not any more. Go long, and reverse after you see a clear signal to get out.
Predictions get you nowhere.
Exactly!!!! From my experience every green trader I'd ever seen come aboard our group sees a whole new world when they learn about shorting. They begin to see that the world is contrary to their belief that equities can only be bought and 'always comes back up.' That part is good. But for some unknown reason they begin to think that anything that keeps going up has to come down and begin to develop, as everyone who keeps posting on these forums for the big pullback, the opposite of 'catching a falling knife' trading.
Terms we keep trying to drill into their heads like, "trade what you see, not what you think" and "the trend is your friend" fall on mostly deaf ears. This phase is really traders' Darwinism as those who can't understand this, but more importantly, implement this into their daily trading, are wiped out and become just another market casualty.
I don't know what it is. Losing money is enough motivation for me to go figure out what's wrong and take action to resolve it. Apparently negative pnl's aren't enough for everyone to see something isn't working. What's the definition of insanity? Doing the same thing over and over only to get the same result.
Just to explain it to those out there who are hell bent on shorting without exit strategies just because the world fundamentals are complete crap or whatever the reason. Bad news matters when it matters and realize for your own sake that the world is completely awash in liquidity at the moment. Between Operation Twist, LTRO, Fed dollar swap lines with the ECB (just to name a few), everyone and their great grandmothers is being begged to go into risk instruments, i.e. - out of cash. Rates are kept stupidly low intentionally and Bernanke even came right on tv and said directly to the world that they will stay so for QUITE AWHILE.
I don't know how this can be spelled out any clearer. As long as cash is extremely available and cheap AND it doesn't pay to stay in cash, banks will yield chase and go to anything else for a return. They will take all the cash the Fed / Treasury gave them to lend and park it instead as reserves with the Fed to collect interest and direct proceeds from UST sales (like those QE programs) to risk assets like equities and commodities.
This doesn't mean we'll be devoid of pullbacks. Sure, we may have a whole month or two this year similar to Sep 2011 because as always, extreme sentiment leads to swings the other way, but waiting for that big pullback is an extremely low probability play right now. This also doesn't mean to get long blindly or get long without an exit strategy. Long or short, you need an exit strategy in place at all times, but the long play is one right now where you'll be less likely to have to hit the exit at a loss.