When to walk away etc etc.,Much truth to that song which has been my
guiding light now for over 20 years of trading and investing.
In life as well
Knowing when to cut losses,
in my view, is more valuable than knowing when to take all your money off the
As I cycle through the top 300 I am now
seeing more stocks showing a wave five low in the coming weeks with very few
showing an upward trend.
It is the sign
of a tired market.
When you see headlines like ‘’9th
year of bull run’’…. ‘’longest in history’’ – you also know this is the sign of
a top ahead.Media hype is a great
barometer or litmus test for the market.
As hype approaches a crescendo, the market is also reaching a peak.
As I keep saying I don’t think the market
is about to suddenly fall out of bed but often demise can come like a thief in
So, what to do?
For most of my years of trading I was
always in the market – even with just a few stocks – I rationalised I was
better to have my hand in as it would keep me sharp.
There is no doubt that having some skin in
the game maintains your focus.
Right now, I am totally 100% cash.
Have I lost my nerve?
I think a total break can be very
healthy. In say, my last 25 years there
was not a day when I did not at the very minimum cast an eye how the market finished
on the day.It has never been work for
me – more like a sport even when the stakes were high.
Most days I still scan the market as I like
to see how each day unfolds. It takes me
no more than 10 minutes to quickly view the charts for the top 300. I need to merely hit F4 to quickly cycle through
my quote list.
You might think the above is absolute
dribble. Maybe; but I like to set the
Now I will offer some guiding principles
that have kept me out of trouble when a major top is ahead:
·I don’t wait for the last
buck.I am happy to take the middle profit
out of the big run up.I don’t want to
fight with other traders at the exit.Have in the past but not now.
·I treat ‘’free’’ monies very differently
from superannuation.In super many of
you will not need to pay tax on profits so you need not wait for the market to
reach the exact pinnacle of the top. Sell and become a spectator.
·If I have bought in recent
times / months I will generally sell when a major top approaches. Risks are high for recent purchases. Some stocks may not be affected but I take no
risks in this regard. In any case now,
after many years of experience in the markets I just simply would not buy when
a market has been running non-stop for nine years. I was guilty of doing that a long time ago
but realise now two things. One is,
markets just don’t keep going up. Theoretically this market could have another couple of years to go – I
very much doubt that but lets say it did – then so be it. I have learnt that extent of acceptance. Secondly you make your money on the big
investment decisions/strategies – not the last couple of bets.
·If I bought many years ago it
is a tougher call. That is very much an individual
call. But certainly, if the stocks have
been ordinary performers I get out as soon as they do not look vibrant and I certainly would get out now. Some such
stocks could bear the brunt of a major fallout, but I will not take that risk.
I do not foresee Armageddon this time round,
but I will not make such a call.
prune as it could get nasty.
Enjoy the ride