A Down Day – Finally

It’s not that I want to lose money, but we are so overdue for a solid down day I’ve been nervous to make any big trades.  This long run hasn’t made complete sense to me as I’ve noted a few times in earlier posts.  Today the big economic report is that GDP slowed to 1.3% growth in first quarter while inflation hits the fastest pace in 16 years.  
Alpha Trends had a good post yesterday that showed how the charts are showing we could be reaching a near-term high.  I’ve been holding back on writing puts this week in the hopes that we get a little dip to refresh the market.  So much optimism can only spell trouble before long. 

I entitled this post “A Down Day – Finally” because once the market lets some steam off it will be a great time to start getting in deep again for a few months, hopefully.  I used to try to make one options trade per week to keep me steady, kind of like dollar cost averaging with options, but found that pulling back on my number of trades when I see the market overextended gives me a better return.  Sounds simple, but that’s one of those simple lessons that a beginner trader doesn’t quite get in the first few years of trading.  Having the capital available for the better days and “doubling down” pays great rewards.  I’m not claiming to be able to call a top at all.  I just try to reduce my risk level when I can’t see a clear path higher.  An investor always has to remember, it takes a 20% gain to make up a 10% loss.