The Market Is Not Made by Rising. The Market Is Made by Falling.
A market bottom often forms through panic selling, not immediate buying after a small decline. Investors should be patient.
CLEC Investment Club Written date: May 13, 2019
Many investors wait for the market to fall, hoping to use the decline to buy cheap stocks.
But often after they buy, the market keeps falling. How can that happen?
In fact, for the market to stop falling, it is not enough to see a rise after a decline. You need to see heavy selling, with prices breaking below all the moving averages and neckline support levels that everyone believes in, making everyone extremely frightened. Only when heavy selling comes out can the bottom possibly be completed. So the bottom is created by selling.
For the market to form a bottom, those who want to sell must have sold, and even those who did not want to sell must sell because of fear. Only in that fearful state can the bottom be completed.
When everyone is selling stocks in fear, that is the signal that the market is stopping its fall. That is why market bottoms are always sold into existence: selling pressure completes the bottom, not short-term bargain hunting. If buyers appear immediately after every small decline, it is unlikely to be the bottom.
So do not rush in as soon as the market falls. Be patient and wait.
Although panic selling does not necessarily happen every time, if the market really falls into a fearful state, the success rate of buying becomes quite high.
The following charts show bottom selling, how bottoms are sold into existence, and that they are usually V-shaped reversals. They are for everyone's reference.
In the market, be settled, calm, peaceful, disciplined, and then gain.
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