Corrective markets truly put your discipline, style, and philosophy as a trader to the test in many respects. If you are obsessing over every tick as a swing trader, you are sure to waver from your discipline in virtually any market. However, in corrective markets you are far more likely to be punished for your mistakes in a more humbling manner, either getting prematurely shaken out of your positions in either direction or holding/adding losers while fighting the tape. If you have been able to sidestep most or all of the market’s downdraft in May, then there is no need to feel compelled to chase an oversold bounce higher. Even if you did ride the wave lower heavily long, chasing has been the bane of many a gambler throughout the history of recorded time. So, that is not exactly the best solution to recouping losses.
I legged into two long positions yesterday inside 12631, but am still largely in cash. Even if we have bottomed, I expect a bumpy ride before we are off to the races for a sustained uptrend anytime soon. Do not accept “moral victories” as a trader, merely celebrating that you avoided having your account blown to pieces by the market’s failure to capitulate yesterday or today. Instead, protect that capital and confidence as we work through a tricky oversold bounce phase within the context of a correction, until the market proves otherwise.
I fully agree
word.