Page 374 - THE MARKET WHISPERER

370 PART 10 - Winning Trades

if you miss several trades, your overall success rate will still be improved
from this last step. Remember: bottoms don’t happen quickly. There is
usually plenty of time.
Identifying the Market Bottom during the 2008 Financial Crisis: SPY

In October 2008, the markets crashed. The SPY (the S&P 500 ETF)
dropped from a peak of $175.52 to a low of $67.1 [2]. Then it shot up by
82% in 14 months [3]. Notice that the first bottom [1] was not the real
one. Could you have identified the bottom and profited from the highs that
followed? That would have been very difficult. Even if you had identified it,
most likely you, like many others, would still have been filled with fear that
prevented you from thinking clearly. Like many others during that period,
I also felt as though the sky had fallen and the world was about to come to
an end, and that the entire financial system was about to sink. I had no idea
whether the ATMs would still provide cash the following day.

As traders, we profited well from the continuing price drops, but were
fearful that we were in a crisis of a scope the world had never experienced,
and hence were afraid to buy. That does not mean we did not profit from
some of the upward movement, especially once it became absolutely
clear that the market trend was indeed upward. But we did not join in the
uptrend festivities as investors who bought at the bottom and held out for
the long term. On the other hand, how many investors really identified
the bottom and bought? Very carefully, however, as short-term traders we
profited from a long streak of days with upward trends.