The Market Is Very Dangerous Here And You Should Feel Uncomfortable

This post originally appeared on TraderPlanet.com.

If you are currently trading this market, you need to ask yourself an important question…

“Do I feel lucky?”

Well, do ya punk?

Wait….sorry, that’s the wrong tagline. What I meant to say is, “Do I feel uneasy?”

Because If you don’t you could be heading for a rude awakening.

If you’ve just been watching the headlines as they constantly report record highs in the market you might wonder why anyone should feel uneasy. But this is actually a very dangerous market right now if you take a moment to think about it.

For example, if you have been trying to get short over the last few months like a number of traders I know, this market has just been continually handing you your head.

If you opened positions when this run began and then started trimming profits as the move began to get long in the teeth, you are sitting on the sidelines watching the parade go by right now. And you might be fighting the temptation to go back into the market with size, as you know that the odds of a serious pullback increase with every up day.

In fact the only status you could have right now in which you would feel at ease with would be if you had long positions that you have held for quite some time that are heavily in the green. And if that is the case, you are not trading correctly.

I know what you’re saying, “there’s no such thing as ‘correct’ trading, and if there was who are you to decide what it is?” Yeah, save your breath, I get it. What I am saying is that a rising tide lifts all boats and in markets that relentlessly go higher each day it is easy to mistakenly equate your ballooning profits with your trading skills.

Any serious risk based methodology would require you to have raised cash from your profitable long positions by now. So if you are still “all in” at this time you might want to take a closer look at your trading rules before it’s too late.

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4 Responses

  1. Pingback: Pseudo Random News and Comment | Mortality Sucks

  2. the ideal would be if the stocks and indexes would shift sideways to build a solid support level to sustain future upside moves..
    if you have really great profits now isn’t the time to get greedy. it’s ok to put in a tight stop loss until the stock gaps down past your stop loss and now the profit from the trade starts shrinking quickly..
    take the $ and get out or a tight stop loss hold style??

  3. Hmm. Normally I find myself agreeing with you, but in this case I have to agree with Berzerk who took the words right out of my iPad keyboard. As long as stops are continually raised I don’t see the problem in letting winning trades continue to run. Why penalize them for working well? At worst, maybe you’ll miss the top 5-10% but who cares?
    Of course, if you’re trading WITHOUT stops and just running on pure greed, well, then that’s something else entirely.

  4. Hi Brian, I don’t agree with you on this one. There is going to be a correction, but when and how deep, nobody can tell. Raising cash when the markets are going up is cutting profits short. Risk control or stops in place are here to stop losses, not the fortune telling about what might or might not happen.

    If one is stopped out, one can always get back in. You can’t do the same with profits, you can’t enter a yesterday position today.

    It’s still a wall of worry in my humble opinion.

    If I’m wrong, I’ll get stopped out and can re-enter. If I’m right I sit tight.
    Big profits don’t come from predicting.

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