Did we really believe the markets would go straight up forever? Was there never a chance the markets could have a couple of down days? Of course not. But when your portfolio is ‘one-sided’ and you just enter the fray toward the end of a nice run, well any down session is likely to give you an upset stomach. As mentioned here many times, there are a million reasons to sell but only ONE reason to buy. Perhaps the excuse you needed was the release of those Fed minutes Wednesday, or some other news that hit on that day or the next. I can tell you this much: if you did unload you probably missed your chance to make nice gains on Friday.
We could be in for more rocky days over the coming weeks and months, certainly if the data from the US and abroad are not in sync with improving economies. Could this week be a precursor of things to come, with higher volatility? Certainly that could be the case but we’ll let the market tell us how to proceed and not make any predictions on the outcome. The VIX virtually wiped out the recent complacency with one brush, we’ll be on watch for a shift in this trend.
The market moves these days are fast and punishing if you miss them. As a trend trader, I’m much more comfortable staying on a trend that I see as long-lasting, accepting the occasional counter-trend days and just going with the momentum side. So, a couple of down days may not signal a change in trend, but I’ll be on guard for a shift. However, I’m not complacent enough to believe profits should just evaporate. As a wise man once told me, ‘we are in the moving business, NOT the storage business’. This game of trading is about booking profits and preserving capital. PERIOD. If you want to stick around for the long haul you have be able to take a gain off the table, or even cut bait on a loser quickly.
Selling is the most liberating experience. To free up your mind and body from a trade allows you to move forward and not live in the past. But we often find the ego gets in the way of this action, and likewise limits our progress toward success in trading. The best advice I can give is this: lose the ego and just take what you earn, and move along to the next trade. Remember, we do not fall in love with companies, stocks or trades. They are simply a means to build wealth if our timing is right.