I started full time trading right at the start of big bear market in 2000. Having seen 2 big bear markets in last 15 years has influenced my thinking on risk management. What doesn't kill you makes you stronger.
My primary objective is to get returns while controlling risk and having very little downside. If you take care of the downside and avoid having negative years the money compounds. If you are losing money in this market then having a re look at your strategy of managing risk is important.
Risk is always there in trading . As soon as you put on a trade risk is in play as the market is not under our control. If as a trader we do good job of managing what is under our control, the market risk becomes manageable.
The things that are under our control are:
- Market timing ( that is why Market Monitor based timing tool)
- Setups selection (momentum burst , EP, anticipation)
- Stock selection (stocks with established absolute momentum MDT DT TI65 or growth +momentum using IBD scanner)
- Trade time-frame (swing trades)
- Per trade risk
All the above things are under your control. How the market or stock will react after our entry is not. But by controlling the controllable factors we reduce but not completely eliminate the risk.
Market corrections are good time to think about your risk management and actually develop and use timing tools. If you do not manage risk you will be out of this game soon.
The game is about making money while keeping your risk to lowest level possible. If you can build a track record of doing that you will find no shortage of money to trade as your friends and family will entrust more money to you than you can handle.
As of now I am in capital preservation mode on all long term accounts. Any change in breadth surge will change that approach.
The Primary Indicator at 192 is now below 200 which means extreme bearishness. Such readings often lead to bottoms or vicious counter trend rallies.
Just because the readings reach extreme does not mean you start hugging and kissing each other, they should be followed by significant breadth improvement. Often it means a series of back to back buy days with 4% plus numbers of at times 1000 plus. That indicates institutional buying . Keep eyes open for that but wait for confirmation.