This is a reply to a PM. No part of the PM is included.
I had to take a little time to think through your post. I can see that you have a number of deep questions that you will eventually have to learn the answers to.
There are no simple answers to many of the questions of day trading. Many of the answers that I have arrived at came through much reading, much trading, then re-reading, more trading and a whole lot of just watching. When in doubt - step out.
For instance, your question about knowing when the market bottom has arrived. I believe we are either in, or fast approaching. a short term bottom, after which the market will continue on down to it's real bottom. However, there are many possible variations on how it could go. I watch and assess every day to verify or alter my thinking on where the market is and where it will go next. There is no simple 1,2,3, this is the absolute market bottom. Of course you can see it through hindsight. Through the reading of many of the available books you can begin to develop your ability to see the bottom for yourself. I would recommend that you spend some time each day on the Intelligent Speculator site. They have a decent grasp on the market and a sharing attitude. They can help you sort through this particular downturn. As you go through it with them, and do some outside reading, you will begin to build a picture in your mind. It will not be the complete picture for some time to come. It will be a start. As you go through many more down turns, short or long, you will add to that picture. Each one will help you become a better trader, if you survive.
Let me share a philosophy that I picked up many years ago as a teenager. It has held me in good stead through many potential disasters. I was living in Dodge City, KS. I was, I think, about 16 or 17 (can't remember exactly).
A new meat packing plant had come to town. There was another plant set up for processing the scrap meat into a dog/cat food base. I went to work in the dog food plant. Big trucks would pull in from the beef plant and dump the leftover cow parts. They were sent through a pre-grinder. A little charcoal was mixed in and the resulting glop was portioned out into tubs. These tubs were like little plastic wash basin things. They were about a 5 gal rectangle. The glop would plop down in the tub. The glop still had sizable chunks of beef parts in it so it did not make a smooth fill. The tubs were placed on a rack and then pushed into a flash freezer. I was told that freezer could freeze a live rabbit into a solid ice cube in about 20 mins. (little trivia there).
The tubs were pulled out the back of the walk through freezer. In the next room we would flip them over and pop the "dog food ice cubes" out and onto a pallet. We had to stack the pallet about 4' high with these uneven rectangular cubes. When the pallet was fully loaded it was wrapped with large clear plastic wrap. The pallets were taken to a large holding freezer, by forklift.
One of my jobs was to sweep the frost accumulations in the holding freezer. Frost would pile up like snow in there. I would sweep it up into a pile and then shovel it into large trash cans for removal. In this freezer the pallets were stacked 4 high, making the rows about 16'-18' feet high. Do to the uneven nature of the product the pallet stacks were also uneven. I vividly remember my first day in that freezer. As I was sweeping, the pallets would creak and groan and pop from the cold. Walking down between those isles sweeping up the frost was a spooky job. I kept fearing the pallets would shift and come down on me. A real possibility as it turns out.
After a particularly loud pop scared me, I ran out into the middle of a clear area. I stood there looking up at the row of pallets expecting them to fall over just any minute. About that time the forklift came roaring into the freezer bearing another pallet. The driver pulled right up beside me and stopped. I remained starring up at the stacks. The fork lift driver looked at me and looked at the stacks and looked back at me. "Think its going to fall on you?" He asked. "I don't know." Was my reply.
The driver, an older gentleman, began explaining to me that he had been with the company a long time and was transferred to this new facility to help train the employees. He said it was indeed possible for those rows to fall over and in fact he had witnessed this a time or two. Well that spooked me.
He had a good read on me. He understood that ego in a teenage boy often got in the way of good sense. (We outgrow that, right? lol) He looked at me and in a serious voice he said, "if you think a stack is about to fall don't be embarrassed to run". He paused, then slowly in a quite voice, said, "If you run, you can always walk back."
That phrase was burned into my brain forever. Anytime I find myself in a situation where the force involved is overwhelming and the future outcome is beyond my control, if I suspect even a little, that I am about to be crushed, I hear that slow, quite voice, "If you run, you can always walk back".
KK |
