Should I go live with a long-only stock trading system when a market correction is expected?

One of the biggest concerns that I’ve seen most traders have in the markets is, “I don’t want to start trading stock because the market is so overextended, and surely there’s going to be a market correction or a bear market or a crash soon, so I’ll wait. When the crash happens, then I’ll get in. I don’t have to go through all that pain.”

The trouble is you might feel like there’s a crash or a correction just around the corner but that doesn’t mean there is one. If you wait for a market correction that is five years away and at a 10%-20% decline, you miss out on all of that opportunity for profit. You’ll go through that correction, but you’ll still be well up. It would be best if you were well up from where you start now.

If you start trading stock tomorrow, the market correction still happens the day after tomorrow. Your account will dive and take a dip, but if you have implemented a systematic trading system approach that’s backtested, that has a drawdown that you’re comfortable with. You allocate enough capital such that you’re comfortable with that level of drawdown. You’re still going to be comfortable with that.

The key is to get educated, get systematic, get in the game and follow the rules. Then, over time, compounding will take care of the rest. It’s tempting to wait for the crash or correction and try to time it, time your entry and be that clever one that started trading straight after the crash, but it’s probably never going to happen. Life’s going to get in the way. You’ll probably never start trading stock. The crash will happen, and it won’t be convenient anyway. You will have taken that money and spent it on something else in life, so you won’t be able to start trading after the correction. Then the market will rally, and then you’ll begin to wait for the next correction.

Get educated and safely get in the game. That would be my advice rather than waiting for a correction. When you go live with a long-only system, don’t take too long to diversify into different types of systems. It’s important to have long only trend following, mean reversion, and short side systems. If you can trade those so that it doesn’t matter so much what the market does, you’ve got a different strategy that will make you some money.

It’s also important to trade across different markets as much as you can. I live in Australia right now and I trade not only Australia but also Hong Kong and the US. I trade long term and short term. I’ve got quite a few different approaches so they combine into a system that works. That would be my suggestion rather than worrying about timing when you get in. Just get sensibly and get in the game.