One Simple Answer: Patience

I received several emails asking me “what do we do now after Monday’s big up day?” My answer is simple: Patience. Keep in mind Jesse Livermore’s quote: “The successful investor is not invested in the market all the time. There are many times when you should be completely in cash. If you are unsure of the direction of the market, wait.”

I would like to make something perfectly clear: I am not a big fan of imposing an investment strategy on anyone. I have said all along that it is important to define yourself. Find a strategy that fits your personality and stick to it! Part of my strategy involves moving to 100% cash during uncertain markets. In addition, I accept that there will be rallies that I will miss out on (such as on Monday), but it’s ok because my philosophy does not involve me being in the market everyday.

Here is some simple advice:

1) If you insist on trading during unstable or volatile markets, keep your positions small.

2) If you go into cash, don’t get upset on days when we rally, it’s simply part of the game.

3) Don’t buy or sell stocks because someone else is doing it. Have your OWN plan, find a philosophy that works for YOU, and don’t blindly follow anyone!

4) Wait for the wind to be at your back. Right now, it’s swirling. No sense in forcing trades to make a few pennies when there are dollars to be made in better environments.

5) Let the market correct, let the dust settle, don’t be in such a rush to trade. I see too many people trying to bottom-fish this market and I feel like screaming: “You don’t have to trade!”

I am not saying all this to be an ass. I simply want traders to learn from my mistakes. I have lost too much money in the past by forcing trades in unfavorable environments. You are better off protecting your capital and more importantly, protecting your confidence. Wait for proper bases to form, wait for some institutional accumulation, and wait for sentiment to be “less bullish.” In other words, wait for a healthier environment…it might not be that far away. The key right now is discipline and patience.

Follow me on Twitter @jfahmy

The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

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