Sunday, 19 May 2013

Another quickie

Another very quick update. Latest purchases need a little more time to get going but the first batch are doing nicely. Not unexpected given how well the market has been doing.

However you will remember that I pulled out of the market when it pulled back on the 17th of April. If I had been working on my support and resistance (S&R) system I would have stayed in and taken the losses on the chin. If the market had continued to fall I would have been stopped out with a slightly bigger loss. But the opportunity cost of exiting the market is way bigger. I even began to short the market so making my loss even greater. I now have to steel myself to reentering the market at higher and higher prices which, inevitably incurs greater risk.

All this goes to show that doing your research properly pays dividends. If only I'd known in mid April what I know now I would be richer and happier. S&R is the way to go. I still have to fine tune: take my backtesting further to convince myself that it will work in a wider range of circumstances. And I have to work on cleaning up those periods when the drawdown becomes  unacceptable. (See the last few posts for a report on the research into S&R so far.)

The market continues its trajectory into the uncharted territory. It's now over 1000 points above its previous all time high. No guesses about how high it will go. But now I know what to do when it begins to fall.

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