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#1 CLK

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Posted 22 October 2017 - 03:06 PM

Here is an article explaining what happened.  Even though this happened quickly, NYAD was not diverging

but it still took several months to recover from the correction that it started with multiple retests. So I think it is remotely possible that we could get a crash of 20-40% without internals warning, but it would be erased in a matter of months, not years.

 

 

https://www.cnbc.com...j-weigh-in.html



#2 CLK

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Posted 22 October 2017 - 03:29 PM

NYMO was diverging for a couple months and also NYSI which sometimes means nothing more than a sideways correction but NYAD was at the highs. What we have now is similar, NYMO has been diverging for about a month and a half and NYSI diverging the last week while NYAD is hitting new highs.

 

 

 


Edited by CLK, 22 October 2017 - 03:30 PM.


#3 CLK

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Posted 22 October 2017 - 03:49 PM

The whole point of this is not that it's going to happen now, but that there is no way you can be certain it won't.



#4 fib_1618

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Posted 22 October 2017 - 04:12 PM

The whole point of this is not that it's going to happen now, but that there is no way you can be certain it won't.

 

Isn't that the mantra of every bear out there since the dawn of time?

 

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#5 da_cheif

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Posted 22 October 2017 - 05:05 PM

 

The whole point of this is not that it's going to happen now, but that there is no way you can be certain it won't.

 

Isn't that the mantra of every bear out there since the dawn of time?

 

Fib

 

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#6 CLK

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Posted 22 October 2017 - 08:16 PM

 

The whole point of this is not that it's going to happen now, but that there is no way you can be certain it won't.

 

Isn't that the mantra of every bear out there since the dawn of time?

 

Fib

 

 

 

I would rather wait for a correction to buy. I'm done with trying to pick big tops though, it doesn't pay well after you

figure in all the losses leading up to it. Maybe people can hang on and be lucky enough to get stopped out before

too much account damage. Right now it looks like only the DOW has been doing much of anything, yeah the market is going

up almost vertical, but at .25-.5% per day, not very appealing given the risk. I don't care if the market doesn't let me in,

there are other ventures and markets to make money in. The lesson I learned is don't be bearish if the market is down 20-50%

just buy and forget about it for awhile.



#7 NAV

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Posted 22 October 2017 - 09:04 PM

Here is an article explaining what happened.  Even though this happened quickly, NYAD was not diverging

but it still took several months to recover from the correction that it started with multiple retests. So I think it is remotely possible that we could get a crash of 20-40% without internals warning, but it would be erased in a matter of months, not years.

 

 

https://www.cnbc.com...j-weigh-in.html

 

If you are constantly worring about a black swan event, how are you ever going to trade the markets in peace ? 

 

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#8 NAV

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Posted 22 October 2017 - 11:24 PM

If you are constantly worried about a black swan event, i would suggest you buy out-of-money puts which are about 5% away from the market price. Do this every month. That way you are always hedged and you can sleep well at night, knowing that you are max loss is capped at 5%. 5% max loss assuming you are not leveraged. If you are 2X leveraged max loss would be 10%. Of course this would cost some money, roughly 0.5% per month or about 6% annually. If you make profits north of 20% annually, you should be able to pay that price, for the peace of mind. 

 

Above 2X leverage, you are playing with fire. Let's you use 4X leverage, then you will have to cap your max loss at 2.5%, so that your effective loss will be 10%. Then you need to buy out of money puts which is 2.5% away, which will more than double your cost for such insurance. In those cases you would be looking at spending roughly 15% on such insurance annualy. You better make sure you make sufficient returns to justify such costs.

 

In my experience it's the leverage that causes people to lose their sleep, not the black swan events. You reduce your leverage and you will automatically sleep like a baby.

 

Not participating in the markets based on such fears is more costly than the insurance itself !


Edited by NAV, 22 October 2017 - 11:26 PM.

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#9 CLK

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Posted 23 October 2017 - 07:41 AM

Here is something different, serious leverage with capped risk. They probably would want 50k in my account to approve me

in case something went wrong, who knows. Futures options seem to be better returns.

 

 

http://www.investope...r/03/061903.asp



#10 NAV

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Posted 23 October 2017 - 07:54 AM

Or just buy deep-in-the-money options a couple of months out, so that you have minimal theta decay. It will be as good as a leveraged ETF or Futures. Of course you will lose a bit in the bid/ask spread, as options cannot be as efficient as futures. But if you are not trading too frequently, you should be okay.


Edited by NAV, 23 October 2017 - 07:55 AM.

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