I ended yesterday’s post with … I generally don’t trade counter to the market as I think it is asking for losses, but in this case, my risk/reward probabilities are quite enticing … so I take a small nibble at the short side of the market.
Well today I got nibbled … I shorted at the close last night and got stopped out at the open today.
The market has proven resilient and that at this time it wants to continue higher. Fighting the tape will make you broke and today was a reminder of that for me. I saw weakness and did not wait for confirmation on this and as a result got burnt. A small burn mind you, but burnt nonetheless.
There’s a saying in the market, “don’t catch a falling knife” and it basically means … don’t try to call the market bottoms as usually it is just to hard to do. I prefer my own saying which is … don’t get in front of a moving train. If you don’t feel comfortable with the trade, stand aside, but don’t try to anticipate something that hasn’t happened. Well … this concept applies in both directions … if you think the market is topping it is okay to be cautious and get into cash, but don’t short until you see confirmation of the topping process. Yesterday I wanted to jump the gun to hopefully enjoy a gap opening (since these are so prevalent these days), but instead was humbled by the opening.
Everyday the market reminds us who is in charge, it does not care what you think or who you are. It doesn’t care if you are right or wrong. It moves with or without you on board. It is quite humbling at times.
Another saying I ‘usually’ adhere to is ‘the trend is your friend’. Stick with the prevailing trend and you will be ok in most environments. Bottom line, today was a reminder for me …
In last night’s blog, instead of “I normally don’t trade counter to the trend” … I should’ve started that blog with “I DON’T trade counter to the trend” … and probably added “and since I see weakness, I am selling my positions and standing aside until more clarity comes forth”.
This was an inexpensive reminder since I had a tight stop loss on my trade, it could’ve been much worse, but I view every trade regardless of its’ profitability as a lesson to learn from, and today’s was no exception.
Today’s price action made me more nervous, but the after-close analysis I perform looked very strong. I’m amazed at how far we have moved in the past 6 days, but that doesn’t mean we can’t keep going up.
The market is in charge, the market is in charge … don’t fight it, just sit down, shut up, buckle up and enjoy the ride!