Plunge and crash are not favorite words of mine. They are on par with ‘pivot’.
They are thrown around too often. But, when they do happen, plunges, crashes and pivots create huge shifts in wealth.
For the past few weeks I have been as negative on the markets since January 2008. Last night I was on Stocktwits stream and wondering why we had not ‘crashed’ yet. I am not short, in fact I am mega long startups and the web economy. But, I am very light on stocks. Considering the massive runs in $AAPL and $AMZN, there has been no correction yet for my portfolio of stocks. I really wanted to short stocks throughout the day, and the community gave me plenty of ideas (would have been winners), but I just am enjoying my recent wins and focusing on the Stocktwits product and community.
Shakespeare is overrated, but I have a favorite quote from Shakespeare that somehow summarizes my attitude towards the market:
I always feel happy, You know why? Because I don’t expect anything from anyone, Expectations always hurt
Change “expect” with “hope” and “expectations with “hopes” and you have a market wisdom to live by.
I always feel happy. You know why? Because I don’t hope for any of my stocks. Hopes always hurt.
I try to stay longer with the stocks that make me happy – the stocks that make me money. I try to kick the stocks that make me sad – the ones that lose me money. I don’t expect to catch big winners every time. I definitively expect to be wrong on some occasions, but I always know how much a I have at risk and so should you. Never let one trade decide your destiny.
Market crashes happen. They have always happened and they will always happen. On days like today, if you are not playing golf (I took a few hours off for lunch and tennis with Rachel), it is better just to sit and immerse yourself in the wisdom of the StockTwits’ stream. Today I was blown away by the awesome ideas flowing through Stocktwits. When I was first blown away by a website – TheStreet.com’ – I was hooked. The writing and intensity was off the charts. Cramer seemed like a wizard. The problem was I felt like an outsider. There was two communities….those inside TheStreet.com and those reading it. No comments, no interaction, just us and them.
Believe me, you will learn a lot about trading by watching people’s real time comments and pondering about fear, greed and hope.
You will learn to recognize capitulation (not sure if we’re there yet):
in general, humans are procrastinators. they’ll wait for the last minute to sell $$
2 types of bottoms: V shaped (capitulation) and rounding (long period of flat before moving upwards) $$
$$ Capitulation: I gave up on all my longs today, save PMs, both gainers and one hard loss. Therefore the market will rally hard immediately
You will learn to be level headed and ask the right questions when most people around you panic:
You will quickly get links and learn perspective…like ‘How bad was Today’?
You will learn to ignore noise and rumors:
TradeIdeas1: $$ Expect more volatility and bs rumors of more bailouts. It’s not going to happen but will stretch the rubber band hard
You will learn to respect risk:
jfahmy: If this is another leg down, it could be swift & brutal. We could take out the August lows quickly. Use caution & don’t be a hero $$
StockSage1: Today is an example of why a trader must always use stops, many stocks told you yesterday to be in cash or very light heading into today $$
You will laugh (at yourself or other people):
vader7x: You’ll know its a bottom when $GRPN starts having deals for banks
toddstrade: Martin Armstrong; “Socialism works until you run out of other people’s money” $$
If you want to learn French…go to France.
If you want to learn how to be an entrepreneur, go work at a startup. Find one you love and just show up like Costanza. Lock yourself inside, find the hardest job and just do it until you get noticed.
If you want to learn how to invest and trade your hard earned money, pop out the ‘All’ stream and the ‘Suggested’ stream on Stocktwits and leave them open in the corner of your monitor all day. You will be immersed in the language of the markets in a short time.
And then if you still want to learn more about market crashes and what to do, read: