Markets Capitulating

Posted by downtowntrader | 7/02/2008 09:22:00 PM | 0 comments »

My gut is telling the markets are in the process of capitulating. I was early on some of my buys and have thus been stopped out of several positions. I am still resisting any temptation to short as any snap back rally we get will occur sharply and trap more then a handful of bears. I've been continuing to nibble on the long side, but at this point, the best thing to do is what for the indexes to stabilize. Even after we get the first rally day, the markets will probably come back for a retest a few days later. It makes no sense to get too aggressive until things become more clear.

These can be difficult times for traders and the best advice I can give is to make sure you cut your losses with complete discipline. Just because the markets "should" bounce back, doesn't mean they "will" bounce back before margin calls force you to sell. Your capital is the only ammo you have to compete in this world, and you need to save as much of it as possible so that you have a fighting chance when the odds are back in your favor.

Good Trading,