I've mentioned before how I like to prepare for a few different scenarios and today is a perfect example of why I do. I've been fully prepared for a rally, but I've kept the thought in the back of my mind that things could unravel quickly. Once I saw things were getting ugly, I quickly exited most of my long positions. Luckily, I was hedged enough that I didn't lose any money today despite being net long. However, looking back, I was upset at missing some fairly obvious trades in the afternoon while watching the unfolding events and debating what was happening with co-workers.
One of the key points I've tried to drive home throughout the life of my blog is that traders should always have a plan and honor their stops. Today is a perfect example of why you should have a stop in place on ALL trades. Hopefully most of you weren't hurt in todays nasty tape, as we will be presented with an incredible buying opportunity soon, and it would do no good if you have no capital. There is a chance we have another nasty day tomorrow as well, but as hard as it is to believe, we are probably very close to a bottom. My favorite indicator T2108 is well under 20% down to 8.84%. VIX was through the roof today as well, and there is a real sense of fear in the markets. The hard part of course is being patient enough to sit on your hands until things begin to turn.
Here are a few links I feel are worth reading tonight.
- Interesting discussion between Andy Swan and a reader
- Trader Mike on worst percentage loss days in the markets
- Looks like Trader X is back to posting
- Adam with a very interesting way to play the current environment
Good Trading,
Joey
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