MISERABLE? ZOOM OUT, GET A GRIP AND BLAME THE MACHINES.
Inside Goldman - HFT programmer - This guy controls price movements and makes us all miserable.
The only thing that changed with Friday's smash reversal to the upside was the near term prospects for continued upside volatility.
This market isn't for the meek or emotionally fragile investor. I see a majority of financial bloggers out there who are so zoomed in short-term price movements I wonder how they make it past breakfast on a daily basis. They are literally providing small drops of noise into a sea of loud screams.
It is a well known fact that we are in a market that is dominated by HFT (high frequency trading). You have powerful computers that are being programmed by that kid with glasses you sat next to in elementary school that was better than you at everything and anything that had to do with numbers. What the HFTs have done is take even the most sophisticated trading systems and turned them into mush. They know what systematic traders are going to do 20, 30 even 50 steps ahead. It makes technical traders who try to gauge every movement in the market all the more irrelevant. It is more imperative now more than ever to take the following two steps:
1. Zoom out when you look at price movements. Weekly, 9 day or monthly charts only.
2. Be emotionally stable. You have to be able to deal with the volatility. It is the new normal in the markets and it is only getting worse. If you can't, then you need to reduce your positions or get out of the market completely.
All that I'm seeing out of traders in the current environment is a stance that is either market neutral with equal parts long and short positions. Or taking small 1-2 point profits here and there, without regards for the larger move in the markets. It seems that a large number of investors have simply turned to the markets as a way to satisfy their lust for entertainment Monday through Friday, while ignoring the primary purpose of the markets -- to create wealth.
You don't create wealth by being market neutral and you don't create wealth by jumping in and out at the first sign of ghouls and goblins. Wealth is created with the large moves that take guts, perseverance and vision to stick to until the investment realizes its potential. Find the path of least resistance, position yourself appropriately and sit tight.
That's what I have done. I may reduce some short exposure here and there, but my core positions are there to stay. Managed appropriately, I expect to be profitable in the near, intermediate and long-term.
There's a lot of noise out there. Blinders and ear plugs required.
