- In Trade Chatter
- Last Updated: 16 January 2013
- By LA Little
Markets just don't go up forever and those that seem like it eventually do come back down. The hardest part about being long is staying long. That's where we are now. Do you stay long when the market is at an obvious area of resistance and with all the earnings spilling into the news? That's what is most difficult about trading. Markets go up more than they go down in terms of time. Although I haven't analyzed the data in that manner I would think it is something like 60% or 70% of the time that markets are rising rather than falling - its just that when they fall they fall fast and the losses are incurred in a very quick manner. That is why it is so hard to stay long. Is this the big fast fall is what one is always asking themselves.
There's no easy answer because you can't be hyperactive jumping in and out of the market like a jack rabbit yet you don't want to move like a turtle either. That's the catch and one has to create a mechanism - a methodology that lets them stay with the trade most of the time but tells them when to pull the plug when the decline is for real.
You can also fine tune that a bit more as well by saying I will buy some protecting when things look most vulnerable whether that be inverse ETFs, options or something else. Think of it like an insurance policy that may actually pay dividends.
Those are the basic tools you have to work with and the generally accepted way of trading the ebbs and flows that are most likely to occur without actually bailing out just before the big takeoff move comes. We are at one of those inflection points now. Now is the time to act or at least to consider what the heck you will do if a spill occurs.