Experienced traders aggressively buy the oversold and undervalued assets into the most extended weakness. That is the key to success. When we aggressively buy or add to our existing position, for example an oversold ETF such as HDGE, during stock market rallies, we recognise the fact that this inverse ETF could go down lower within the next few weeks. However, we have our focus in the mid-term horizon. It is no different than when we were buying risk assets in August and September of 2011, and the market made its turnaround on October 4th. We even received emails from our subscribers calling us reckless when fear in the market was at a very high level. The point is that we subsequently had a powerful rally. We were confident that eventually we would be right.
The timing of entry into any asset is not about being perfectly right. Rather it is about going with the most reliable and proven leading signals of the market. Since we don’t know when the market will move, or by how much, it is extremely important to ensure that we have as many signals in our favor as possible, at all times.
At the end of the day, amateur investors will continue to buy high and sell low. Even in the long-term, during extended market uptrends of equities, most investors lose money over a period of years or decades. Our strategy is to always buy or sell before any major market move rather than after it has already begun.