The Gospel Truth About Pulling the Trigger

This evening, I'll let trader Gary Smith speak the gospel truth about times when the market is just going up:

"So just before the 4:00 p.m. closing bell, I phoned my broker to place a trade. But I blew it. I got cold feet and hung up before I could place my order. My usual quickness just wasn't there on that day.

"Too bad I hadn't been able to pull the trigger on March 3, since on March 4 the market rallied strongly and closed up 190 points...I was unable to buy because my flexibility wasn't there. I was worried about the employment report to be released on March 5, even though I knew in my heart it was a win-win situation. This means that there had already been such negative expectations built into the report that, even if it was negative, the market would have a relief rally. And, of course, if it came out positive, the market would soar.

"Much to my dismay, the employment report on March 5 was a positive surprise and the Dow skyrocketed 268 points. My lack of quickness caused me to miss the 190-point move in the Dow on March 4 and my lack of flexibility caused me to miss the 268-point move the following day. So I did the only thing a good trader could do under the circumstances: I plowed back into the market before the close of March 5.

"Now stop right here and think about what I did on March 5, and ask yourself if you could do likewise. I went into the market after a 459-point, two-day rise. Most traders find that too difficult to do. They fear it's too risky to chase the market after such a rise because some type of setback is inevitable. The real risk, though, is not to be in the market after such extreme momentum." Gary Smith, How I Trade for a Living, pages 139-40

In our TSP Investment Club, we want to be 100% in the C Fund when the market is going up. Why hesitate if the market is going up? That's how money is made. That's how winning is done.

When its time for the market to go down again, we will go 100% into the G Fund.

We react to the changing character of the market. Sure, we can have our predictions, our anticipations. But when the market is going up, that's all I need to know.

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