I'm Coming Out

Up till recently I've been a heterotrader, trading one side of the market. I'm proud to say that I am now a bitrader. I had a good week and almost everything was from the long side. I cut my trading teeth on this bear market and shorting has been my entire game. I think the thing that was causing me problems was the phrase "bear market rally". Yeah its a rally but we're in a bear market so I'm looking for shorts. I did poorly in the last rally we had and the same thing was happening this time. Well it finally penetrated my thick head that for a short term trader there is no such thing as a bear market rally. For a short term trader a bear market rally is an UPTREND. I began to shift my focus to shorter term trendlines and the proper trades quickly became apparent. If your having problems along these lines you may want to get the long term charts off your screens for awhile.

 

Magna

I qualified the statement with "for awhile". Checking the long term charts has always been part of my morning routine but a couple of weeks ago I stopped looking at anything past this last bottom and am keeping a sign near my computer that said "we're in an uptrend". I really think the long term charts were giving me an unconcious bias to the short side. Anyhow it seems to have worked.

 

Nicodemus,

Really like your post because I struggle a lot to keep in mind what the market is actually doing vs. what I expect it to do. The only sentence I question is your statement: "If your having problems along these lines you may want to get the long term charts off your screens for awhile." It seems that with this sentence you are making the same mistake of a predetermined expectation, but in the opposite direction -- now you are expecting/thinking "Long" while cutting yourself off from data that can signal that thinking Long may no longer be appropriate.

One thing that has helped me is the belief that the market can do anything at any time. (I think I got this from Trading in the Zone. I remember it so well because it nailed one of my main (many) weaknesses.) For me, that means always being aware of the possibilities suggested in the long term charts. As support for this, let me mention that at this time the NASDAQ and DOW may be forming a head and shoulders top -- the high of this week failed to take out last week's high plus some other TA indicators (but not all) suggest a H&S top, which, as you probably know, means the market may now go lower. But anything can happen. The market may go higher. I just think it is good to be aware of the possibilities suggested by the long term charts so I can adjust quickly.

What I really like about your post is that I had never before considered how the expectations embedded in the term "bear market rally" could impact trading decisions. Helps me sharpen up my own thinking. Thank you for posting your insight.

 

Fast

Thanks for the input. I see your point. The thing is I have been deliberately trying to overcorrect. May backfire on me but we'll see. Weve got a ways to go for an H & S. I think the compq would have to take out 1650 to break the neckline but like you say, who knows what will happen.

 

Nicodemus,
I saw the purpose behind your tactic; it's just that your wording made it sound like you were doing it without monitoring to see whether the market had changed directions. When I read your reply to Magna, I realized this was not correct, but I had already sent my post. I meant it when I said I appreciated your insight about how you were reacting to the term "bull market rally." I learn best from very specific examples.

 

between how many promising short positions vs. long positions show up on your scans and the near term market direction. This ratio goes from heavily weighted on one side or another but really seems to indicate short term market moves. I sometimes anticipate market direction better with this method than analyzing the charts.

 

it may be the time to wait to short again,