I feel compelled to make a quick observation about the market's movements yesterday and today. There are still some different rumors surrounding what exactly caused yesterday's crazy drop and at the end of the day it really doesn't matter. The reason it really doesn't matter is the exit strategies we set up. The bottom line is this: if you stay true to your primary, and in the case of yesterday's drop, your secondary exit strategy you will be fine. I wrote an article called "The 5 Hard Questions of Trading" that had a lot to do with how to set and stick with exit strategies (the article is being expanded into an e-book that will be out soon). Two of the five questions were "Do I have a well defined exit strategy?" and "Can I adjust the trade if I'm wrong?". If you have set up your trade correctly to begin with and can answer these questions correctly you simply will not stress when something crazy happens like it did yesterday.
As far as today is concerned, the market has already been up, down, and everything in between. People are scared and uncertain about what to expect and are panicking. Day traders and fund managers who have no business being in the business are being pushed around by every little change in the wind. The answer to how to survive this is the same. Have your exits defined, and stick with them. It's really that simple.
We could well be at the beginning of a pretty good sized correction, but we could also see a reversal of this recent bearish run. Who knows? The important thing is to not get caught up in the panic and instead focus on staying disciplined.
Jeffry Dunyon
CEO, Safe Option Strategies
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