When to sell in a falling market

I am not an investor in shares only investing in index options when I feel that either a major shock is coming or one has been oversold. If however you do hold shares, I would remind you of something that my uncle taught me back when he was a broker in the 70s in London – if you don’t think a share will go up then sell!

This advice works very well and avoids holding on to shares as they drop. If a stock is falling then sell it. If you like it again then you can buy it back.

Now, why is it that you don’t see this simple advice in the media. I believe this is all to do with the conflict between individual interests and the interests of all. If a market is falling then an individual should sell. If everyone sells then the market drops even further. No one in the media wants to be seen encouraging a market rout.

This week I expect to see a rebound. This may be the most extended dead-cat bounce that we have seen. It may even last until Christmas. After Christmas we will see a steady slide as results come out and the horror of the retail results for the Christmas period come out into the open. I am currently eyeing the FTSE out-of-the-money put options at 2500 that I expect to become significantly cheaper as we move into this dead-cat bounce. If the FTSE rises over 4500 then I will certainly be pouncing.

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