Good Tip

Trading Tip:

You're only 15 Minutes Away From Becoming a Millionaire!



Just the other day we were talking about getting "blindsided". We were
in a stock that came out of the blue with an earnings shortfall
warning. That stunk. The other day it was a blindside of another type,
some nuts had blown up several subway areas of London. So, the world
markets fell in a heap, and heading into the open, the futures were off
fairly substantially.

The question on a day like that is, what do you do? the answer of
course is "nothing". You weather the storm and sit tight. Why? Because
the market is an odd place.

The financial markets almost disgust me. In fact, they do disgust me.
We are talking about money here, and nowhere in the world is the
concept of greed more evident than in Wall Street. For someone
like me who is oft quoted as saying money isn't everything, it seems
odd that I'd be involved in the business of it. But that's indeed where
I am, and sometimes it disgusts me.

Why? Because when something like this happens, the market goes into
calculation mode. They look at the airlines, the drop in travel, the
overall fear factors and then calculate where to make their money. In a
situation like the London bombing, the first reaction is a knee jerk
sell off. But then the calculations get made, and in a matter of days,
things are quite close to where they were before the event. It's the
ultimate example of "reverting to the mean".

So, in a situation like this, where there didn't seem to be any
biological, or nuclear events, they instantly decided that the markets
had become a bargain and they moved in. Cautiously of course, but they
bought none the less. Sitting tight during most of these sorts of
events is indeed the only thing to do. Panicking out will just lose you
money.

Look at that day. From down 100 to up 34 on the DOW. If you sold into
the panic, you lost money, or at least lost the opportunity to make
money. They have become used to the idea of "the market always comes
back" and today proved it. Sure if we had a nuke go off in Washington,
that would be a different story. But, just like the Malaysia bombings
and the Spain bombings, when it's in a foreign land, the dip is
momentary at best. Buy the panic.

What about the stocks you have? First, remove ALL stops the minute you
get up. When the market is looking to fall hard on an "event" you'll
get stopped out almost immediately, but at a horrid price.

Remove your stops and then make an assessment of the panic. If it's not
something that's going to really bother the market, then sit out the
day. If it looks like it could be "really" serious, sell the first
decent bounce, and wait to re enter lower.

Terror stinks but it's what we have today. The market's react, just
don't let them get you panicked. Go slow, and use your head. Often
times, you'll end up in pretty good shape.

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