The past five trading days have been some of the worst price action I have ever seen. Today will go down as one of those trading days you never forget. If you didn’t lose money, you had a great day. If you made money—well done! The dip buying signals of the past six years have failed, the bell has rung, the bulls have lost, and something bad is brewing.
Here are my 12 tips for trading through this mess, when central banks lose control, and supply and demand kick in.
- The market is now in a downtrend. Traders will not be bailed out of bad, long side trades. Many investors and traders are now trapped in big losses and will be selling every chance they get.
- Selling strength short is the path of least resistance in this market.
- Continue to trade signals and not opinions. Have a reason for every trade. No signal, no trade.
- Trade small. The velocity of price action can causes big wins and big losses. Protect yourself from the big losses with small position sizes.
- Investing in stocks early in corrections and bear markets is not a profitable strategy. The hurricane of a bear market wrecks all ships.
- If the market environment does not fit your trading methodology, don’t trade until it does.
- Take each trade one at a time.
- Trade your system and not your emotion.
- No, it doesn’t have to bounce back.
- Yes, it can go lower.
- Maintain a clear mind and don’t let your ego, fear, and shock cloud your trading judgement. Follow your trading plan.
- Focus on surviving and not on profitability.