Saturday, August 6, 2011


I know I've written about this a few times in the past. But it seems never enough.

Considering the market over the last few sessions and panic over last two, I thought it was high time to scream it out loud once again. DO NOT guess on the bottom. What you think is low today can seem awfully high tomorrow. Selloffs can and do go for much longer than the "common sense" indicates. So do euphoric spikes for that matter. Premature bet on reversal will cost you dearly; correct guess will still be just that, lucky guess. NO ONE ever was able to pick exact reversal points consistently. Attempts to nail exact reversal is second most common reason for traders demise. Oversold gets oversolder, then oversoldest, and then sells some more before reversing.

Bottom line: if you want to trade reversal, trade it on the RIGHT side of the reversal - AFTER it happened, price retested the low and confirmed the strength. Trading it on the left side is a childish bravery - cemetery of traders' accounts is sprinkled with tombstones saying "He was a brave trader."

Disclaimer: this warning will be ignored by majority, just like 1000 similar warnings before. If you, a single reader of this - yes, you - heed it and play it right, that's all reward I count on. If there are two of you, I accomplished a lot today.
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