Have we bottomed? Does it really matter?

When I first started day trading, I used to let my 'swing trading' instincts guide the way I treated the market on a day to day basis. That thinking left me vulnerable to missing out on some huge moves during this past year. Why? Simple: Markets tend to go much lower or higher that one might think. Especially in a bear market! The science (or art :-)) of picking a bottom is simply a waste of time in my opinion. One can try justify the (many) reasons for the call - whether it is technical analysis, fundamental, astronomical or whatever, one simply does NOT know what will happen tomorrow or next week. I would much rather let the market play itself out and show its hand BEFORE I react. So, my preference is to react and NOT to anticipate.

If one is an investor, or a swing trader, then in my opinion, it is more important to know that the bottom (MAY) have happened (like we have now) and use it to make their trading decisions. In other words, I would prefer to get CONFIRMATION of the move instead of guessing when it will happen.

Which brings me to the other point - as a day trader, it should not matter whether or not a bottom (or top) is in. It may give you bias as to the direction you want to go in, but should NOT determine your trades. A day trader needs to be nimble enough to adapt to market conditions that change very quickly during the day and trade based on setups, news, whatever, to gain an edge. If you have a set of criteria (such as MA crossover, MACD, Stochastics, whatever) that you use effectively, and you get a sell signal in a down market - a day trader should not be afraid to take the signal just because the market is "down too much already" and will surely turn soon. The key is to KNOW your criteria for taking a trade, such as support/resistance zones, profit target, and most importantly, a logical place to put your stop (i.e. your risk).

So, come Monday morning, everyone and their brother is expecting some kind of pullback in the market (myself included). But if we don't go down, and go up instead - then you follow the trend (until you are proven wrong).

Good luck with your trading.