How low can you go?

I trade Nasdaq techs only, and notice that in the last few days in particular, I have only been going long. All my stocks are beaten down wrecks, and it appears I'm scared to short at these levels. I missed all yesterday's move after the Fed cut - I just sat there and couldn't pull the trigger. Normally, I have no bias towards longing or shorting. Any suggestions or ideas?

 

we were already at 1600 - the markets have uncanny ability
to "deja vu"

 

IMHO, i also think we'll get near the april low (but maybe not all the way)

Everyone in the market subscribes to Technical Analysis theories, it's mass group psychology. I think everyone expects and/or wants to see the double bottom - it would be self fullfulling prophecy.

besides, the big boys will make just that much more $ if they go long a little lower

 

Sometimes the trades that turn out best are psychologically the hardest to make. It can be hard to short new lows and buy new highs because you keep telling yourself how much more you could have made had you already been long or short from a better price and wonder how much longer it can keep going in that direction. The way I deal with that thought is to remind myself that price is just a number that can go up or down from any point, and if it's likely to go down still more (and the obvious negative reaction to the Fed cut put the odds way in your favor on that one!), the only correct action is to go short right then and there. Mentally, you tend to compare price now with where it's been in the past and judge it on that basis, but that is often very deceiving. What's really important of course is where price is likely to go in the near future, and that can always mean still lower or still higher. You'll never get everything that's possible out of the market, just remind yourself to go ahead and do the best you can with what's being made available right now.

 

tom_p,

I think you are doing the right thing by being extremely careful and not going short at these levels. The short interest is at a dangerously high level and I believe that over the next several weeks we could witness a very sharp rally that could add 300+ pts to the NAZ Comp and perhaps take DJIA over 11,000. IMO, the NAZ bottomed out today and any surprise is more than likely to be to the upside.

Happy Trading.

 

tom_p:

If you ever just do pure daytrading, then just pull the trigger!!! Seriously though, the market doesn't do what you and I want it to do. It just does what it does. (Hope that makes sense to you.) Remember: "The trend is your friend." Read armaniman's last sentence concerning doing the best that you can. On the other hand, if you do swing trading, a different mindset could apply and your hesitation could be justified. Those morning gaps can kill you!

BSAM

 

Take a look at a yearly or monthly chart. It is a completely different look.

rtharp

 

Armaniman: Sometimes the trades that turn out best are psychologically the hardest to make. It can be hard to short new lows and buy new highs because you wonder how much longer it can keep going in that direction. I remind myself that price is just a number that can go up or down from any point... you tend to compare price now with where it's been in the past and judge it on that basis, but that is often very deceiving. What's really important is where price is likely to go in the near future, and that can mean still lower or still higher.

Very wise words. I find many of the best trades are based on imperfect setups. Failures of popular patterns, for instance. I believe armaniman sited this in another post.

As far as buying/selling a high/low I would add that a trader should be aware of historical extremes in whatever timeframe he trades in. While I believe that strong directional movement tends to persist there comes a time when the risk of taking on a position that allows for adequate wiggle room places you at increased risk in relation to a statistically limited potential reward. Just “wondering” whether or not the market will continue to move in a given direction is not going to cut it. I believe it is important to find ways of measuring and calculating the probability of continued movement.

 

Appreciate all the input. This morning I did 2 trades, guess what - both shorts. The fact that they were both winning trades is an added bonus, but I'm really pleased that I broke the psychological ice.

 

As Jesse Livermore once said, prices are never too high to start buying and never too low to start selling.

Being a short-term trader, I try not to have a bias for either the long or short side. I do have an opinion on future market direction, but I have found that even in the most extreme bull market there are still many shorting opportunities and vice versa.

Htrader