So, what's the market looking like and what should we be doing? This is the age-old question very few have figured out in the brief history of the stock market. There are some facts to be aware of. First, the Market is still relatively near its all-time high. Second, financial vehicles that are more agile are easier to move in and out of. Third, each person/institution is acting in their own self-interest buying and selling for very dynamic reasons. Don't get trapped in the hype loop. Look at your situation from a risk management standpoint and ask yourself what you care more about. Downside protection or a little more profit. Use the charts to make your decision not your emotional attachment to some idea you had in the past. Agility is critical.
The chart below is the SPY from 1993 to present (Oct 2018).
When looking at the chart what do you see? How does it make you feel about the possibilities of the future? What is your current situation? Age, trading style, account balance, short-term strategy, longterm strategy... Why are you even involved with the market in the first place? These are some basic questions that one must answer before trading. Without these basic considerations, interacting with the market could easily be classified as gambling.
When you have the answers to these questions, trading and investing becomes a much more expansive and simple process. Without them, it is a very expensive process. Trading can be an endless growth opportunity if you allow it to be. The mindset required to be an effective trader takes a lot of time and effort to cultivate. It is not easy because it requires one to accept that they are the thing that needs to change. Many cannot cope with this realization and quit, make excuses, point fingers and so on. We all know the symptoms. This is the biggest mistake you can make because you are practicing not taking responsibility for your actions. The math behind this is simple. There is a 100% chance of not succeeding if someone quits something before becoming successful.
There is a solution and it is a simple one. Keep at it and continue to adapt until you have something that works for the right reasons. The right reasons are:
You have tested it over time and your real performance is clear.
You understand what you are doing and the possible consequences of your actions.
You are knowledgeable of how the overarching system works (very important).
You understand why you are doing it.
It is not good enough to just have these things in your head. This is a classic mistake. One of the best technologies ever invented was writing/ journaling due to many mystical effects including the required reflection and recording of ideas. Write it down and expand upon these ideas every day. Then, simplify those ideas until they become as short as possible. Once simplified, challenge the idea and play with it to find new perspectives. Then test the adjusted model again. This process takes years to get to the clarification required to be qualified as worthy of internalization. Just like an investment, this takes time and the earlier you get into it the more you will get out of it.