Discussion in 'Shares' started by Tropo, 1st May, 2007.
An interesting article...
I like reading Chris Tate's stuff, but I've got an issue with his graph pg 2 of your document showing the "Plenty of warning to go short if you were an index trader".
To me that comment looks like great hindsight. If you were trading through that correction/pull-back I don't see any indication of the huge drop that would happen. That correction does not look any different to the ones in May/Jun 87. If you had some well placed stops in place they may have been triggered and you could have sold out in that correction (hopefully at a good profit), but why would you take a short position?
Tropo, I'm not a technical analysis expert (in fact I'm not even a technical analysis expert beginner), so maybe I'm missing something - do you think his comment is just in hindsight, or is there something about that chart that tells you a big drop may occur?
At this stage (as indicated on the chart) warning was correct.
It has nothing to do with the hindsight. Market would always rebound to the previous high.
As you can see from the graph, market dropped like a stone....so at the certain level, when this level was broken down, some traders went short making a good profit.
You will never see or know how big drop may be !!
You are taking short position in anticipation of the reasonable drop in price from certain level.
In many cases short position is more profitable than a long one in the short term IF you get it right.
A lot of traders are buying instrument on the way up and selling the same instrument on the way down, making a double gain.
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