Without stopping, stock markets around the world are declining significantly. No time for breathing so far, none in sight either.
However, you probably are still invested long through your stock and buy and hold positions on different assets. Maybe a while ago you have gotten a tip from your broker, a website or a friend. Did they also give you the tip to get out of the market?
Well, they don’t know what they are doing just like you. You have no exit strategy, you don’t have an entry strategy – no strategy at all actually. You just buy and that is that – you will hold forever, maybe, or maybe not – do you know?
If you don’t know how to navigate in the markets, then what do you do if they see the worst drop since the beginning of the record for the start of a year? Like this year.
If you managed to somehow foresee this decline, you may have been lucky enough to get rid of your positions in what turned out to be a new direction of the market. Good job!
Still, it’s even nicer if you are clever enough to find an approach to managing your money that not only lets you profit from bull markets, and gets you out once they are running out of steam. But not only that, it also features a component to profit in bear markets just as well.
Any decent trading and/or trendfollowing approach will get you exactly that. In this regard I have found the Bill Williams Chaos Trading approach very helpful, any other thorougly tested strategy will do the trick, too.
Have a look at four different world indices showing entries for a possible long-term trendfollowing approach to this current market situation. I am covering Nikkei, Hang Seng, Eurostoxx and Dow Jones.
Let me mention about the Hang Seng right here that in a previous post the indicated short signals (fractal sell signals) have been pointed out and are currently active in the market, i.e. short positions are in profit as of now.
All stop orders on the aforementioned markets are at breakeven (BE) so any turbulances won’t cause trouble, despite the fact that profits are given back.
As I have also directed your attention to the fact that nobody knows what happens tomorrow, there is no way of knowing if the current market behavior is the start of a huge downtrend, or simply a sell-off that will end at the indicated important support level areas.
That’s why any serious trader involved in the markets right now will only enter with an appropriate risk strategy, diversification and the knowledge that it will most likely be a wild ride. That should give some pointers on what to do with the different emotions coming up in the next weeks and months. If you would like to read further on this, check out the categories “Risk Mgt” and “Emotions/Psychology.”