I had just entered the market in the last week of June '06 and my timing seemed lucky, to say the least. After I entered, the markets basically shot straight up right up until we had that pullback last Tuesday. My timing, again which was pretty fortunate, made making money in the markets seem like cake. This could be a bad thing for me long term if I don't shake out a few basics from those of you with a lot more trading experience. The question I have for those of you who were actively trading, either intraday or on a 'swing' basis' back then, is how did you cope through that period? What strategies did you employ? It is my understanding there were many, many pullbacks that people got caught in, with nasty and quick reversals occurring nearly a dozen times in about a three month period. The main reason I am asking this is two fold: Obviously, I'd like to know what your opinion is on how to minimize losses after what can be a gut -wrenching and demoralizing experience, where one feels like they are being 'washed and rinsed', and, I'd also like to know how you finally determined, by chance or actual projection, when the the markets had either arrived at or were approaching a true consolidated bottom. Thank you very much.
It's strange, those market bottoms. Personally I think market bottoms are formed on VERY bad news (bear markets end on very bad news?), huge down day with very high volume. Then you have your follow-through break out of the down trend on high volume and then you know it's legit.
I will say the bull move after the meltdown was a cake walk. Any pullback was supported. You could double down/cost average to defend your position and it will come back up to where you could do break even or a nice gain. Try doing that now and you will get killed. Personally I did okay during the last meltdown. But it made him cautious for the bull run. I didn't capitalize on the bull run as much as I should have.
I got caught going long many times during that pullback, I was long a few stocks going into that drop, however I sold off a few and held onto to one while I stayed about 75-80% cash. Tried to trade on the long side numerous times only to sell at a loss here and there, didnt feel like going short at the time because I knew the markets were going to rally again. Of course I missed the bottom, once I saw the markets rally I thought another pullback would occur once the dow got to the 11500-11700 area. Never happened.
Forgot to mention that I DID go long plenty of QLD at 66-67 area, sold off around 6 or 7 bucks after that. Eventually I held it until it came back to my orignal purchase price and I ended up selling around 69-70, everyone knows what happened after that.