Surviving Market Pull Backs
Investing successfully has many components involved in the process. One of those components are just as important as any other. Technical are important, is the company above or below there 50 day moving average? Is the overall chart showing an upward trend for the company? in recent history that past 3 months how has the company performed when the moving average pulled back to the 50 day moving average? Did the stock move up in the next couple of days after touching the 50 day moving average? if it does this is a sign of strength and institutional buyers giving the stock support.
How has the company performed on its last two, three, or four earning reports. Did they meet, beat or fail in overall earnings expectations? How did the company report its forward guidance?
Also is the company that your thinking of investing in a disruptive technology or company. Examples, Tesla, Uber, not now but in its early days Apple, Bitcoin?? Just to name a few but there are many many more. Being able to spot a disruptive technology that will change the way that other companies in its industry do business.
These are key elements when deciding on what company you want to invest in. But another key component is timing. Market timing is absolutely imperative.The market and the economy moves in cycles. In essence good investors are like a surfer trying to catch a wave. These waves are really what determines profitability and success in investing. For instance you can buy a stock and the stock dive 20%. Does that mean that you made a mistake, or that the company is no good. NO it could just mean that the time that you chose to purchase the stock the overall market was pulling back. Maybe mutual funds were pulling money out of that particular sector, similar to what happened earlier this year in the tech sector. So how do you survive this and still be successful trading? Longevity. You have to have the money and the staying power to ride through market pull backs and corrections. Over extending yourself and exhausting emergency funds will always land an investor in hot water.
Remember to always keep cash reserves for a market pull back and you can survive most market pull backs.
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I've lost 60 to 65 percent of my portfolio. I'm sure I can survive any future drawbacks. I'm young and won't really consider selling before 2020 at the minimum. I may momentarily get oit if I see a huge rise but I'll be sure to get back in as soon as possible.
This will happen especially if we invest in growth stocks. Growth stocks can pull back when the market slides on average of 25-30%. The people who have the stating power really benefit because they can survive the huge market pull backs. They are are the ones who get rich. Stick in there and hang on. Build some cash on the side and look for an opportunity to get back in.
Square was at $12 two years ago now its trading for $85. imagine if you had 100 shares.
Thanks @clearbluecrypto, I find this really helpful. Also left you with a small upvote. There is need for exploring various strategies given the nature of the current markets(highly volatile). I am beginning to pay more attention to long term strategies.
Yes long term thought process in trading is imperative in being successful while investing.
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