Run to the Hills?

You are probably hearing more and more calls for a market correction or crash in the main stream media and various pundits and prognosticators.  While I agree, as you know if you have been following the Weekly Market Update, that 1700 in the ES was the initial target for the MTPredictor wave 5 top and that we are now seeing that correction in progress, I would also caution betting the farm on it.

The whole thing about analysis whether it’s mine, yours or anyone else’s is that it can be wrong.  In fact, a good trader may be wrong more than he or she is right with their analysis.  The important point to focus on if you are going to trade any analysis that you agree with is to take a small controlled risk and have a larger reward.  So, if the analysis is wrong you lose a small without wiping out your account (or worse) and if you are right, you win big relative to what you risked.  This will also help take a lot of the anxiety out of your trading.

When I was a broker for Charles Schwab I, too often, would find clients betting their entire portfolios on a single stock, market direction, premise etc.  This produced great anxiety for them and me as well, simply because I knew what could happen if they were wrong.  Even after speaking and pleading with some of them to take protective actions, they insisted their analysis was correct or that their stock would go up forever.  Sadly, many of these clients were eventually financially crushed.  I’ve seen margin calls so big that the brokerages went after people’s homes.

The bottom line with analysis is not to bet the farm on it.  Take a small, controlled risk with a larger reward so if you lose you lose small but if your analysis is correct, you can profit much larger than that initial risk.

And now, on to the analysis:

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