14% Corrections Are Part Of The Game
- Posted by Frank Zorrilla
- on January 25th, 2014
It’s amazing how quickly many investors/traders forget that corrections are part of the game. The last year or so conditioned many traders to disregard their selling rules just because every time the market looked like it was going to start a correction it miraculously bounced and grinded higher for days. For example, back in April of 2013 the Nasdaq fell 3% in 5 days it looked and felt like it was the start of a correction, then out the blue it grinds higher for 23 days in a straight line. The same exact thing happened in June of 2013, then the sell offs became 1 day affairs that scared the bejeezus out of people just to see the market scream higher immediately. After seeing this a few times the question became–why even sell or take a losses if they are just going to take us higher again due to FED’S QE. This time might be no different than 2013 and we might just grind higher for the next 17 days, but three things: you cannot formulate your trading rules based on one year worth of data, you must realize that the market goes up and down not up or down, and you must know and accept the stats–the average intra year decline since the 80’s is 14.7%
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Frank Zorrilla is the founder and chief investment officer of Zor Capital LLC.He began his Wall Street career 10 days after his 20th birthday when he became a Series 7 licensed stock broker. More »
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