Given that the market has been behaving so erratically as of late, Joe Fahmy of JoeFahmy.com shares a list of five things that all traders should remember to do during market corrections.
1) Protect Capital—The best traders all preach defense first. I moved my clients to a large cash position at the beginning of the year and will keep it that way until market conditions improve. Raising cash isn’t for everyone, but I also don’t believe in being 100% invested at all times.
2) Keep Positions Light—If you normally buy 1,000 shares, there is nothing wrong with buying 100 or 200 shares. One reason is that it allows you to scale into some stocks you might like longer-term. Another reason is that smaller positions help you deal with higher volatility. That way, you don’t get stopped out of everything during wide market swings.
3) Keep a Watch List—When we start a new uptrend, it is important to be ready to pounce on the strongest stocks out there. For example, after the March 2009 bottom, GMCR and NFLX were two of the first stocks to emerge to new highs and they went on to become huge winners.
4) Protect Your Confidence—Don’t underestimate the importance of keeping a strong mind during these downtrends. I used to get discouraged and think we’ll never see an uptrend again. Now, I am highly encouraged because I know with 100% certainty we will see a brand new uptrend when this correction ends. The key is to protect your confidence so you are ready to take advantage of it. To read the entire article click here…
By Joe Fahmy, Trader and Blogger, JoeFahmy.com
