[dictatorsunion]

I don't understand why people are catching a falling knife. It is as though they have never been in bear markets before. Understand the market psychology and don't waste your money. I have friends who DCA-ed and regret because it took them years just to breakeven.

In a standard fear cycle (Google it), we are only at the middle stage between denial and fear. There is an acceleration downwards that we have not experienced yet (Crypto 2018 and China 2015 are good examples if you want to look back at recent history). Wait for that to happen first. You also can feel the time to buy when people are very distraught and demoralized by the endless drops. Twitter activity will change a lot, trust me.

A good way to read when to buy is, aside from seeing that everyone is completely mentally exhausted and demoralized, is that the VIX is around 30% and dropping, and distribution is over with accumulation channels being formed, which is when multiple supports are being built. This is when bulls and bears are in equilibrium, with bears quite exhausted but still exuberant. If you want better certainty, at least wait for the stock you want to buy to cross the 200 SMA, because it is a good indicator that the stock is being rationally valued once again.

My point is that DCA is only good if the trend favours it. It is central limit theorem where you reduce the variance by multiple sampling. Good shorters DCA downwards as well, so you are fighting these people too if you are DCA-ing now.

[rnd33]

Are all bear markets the same? If there's a clear signal when to start buying why isn't everyone doing it?

To me technical analysis of the stock market is the modern equivalent of a shaman predicting next year's harvest. It sounds very convincing but there's little scientific evidence that it can predict anything accurately.

[dictatorsunion]

It's as though you think everyone is rational. If they are they should be selling, but no, they are buying.

[rnd33]

I'm not saying everyone is rational, I'm just saying there is no reliable way of predicting when the market has bottomed out.

DCA-ing on the way down means I will at least buy lower than a year ago. I have no way of knowing when we will bottom out, or if it will be -25%, -30% or -50% and beyond.

[dragandj]

for someone to be able to sell, another one has to buy.

[coliveira]

The very fact that there are still so many people willing to "buy the dip" shows that we're just in the beginning of the process. There will be a time (a few weeks from now), when almost everyone will be screaming sell. This is just how ALL bear markets work.

[zone411]

Do you have any research showing that waiting for VIX below 30 after it was high is a correct strategy? You can just test it in around 20 lines of Python or just in Excel. Or that buying in a situation like now is a bad idea? Did you run a historical backtest? Did you test the trend following and the 200-day SMA? Please share. Of course, to show that any of them are promising models, you need to do much more than just the backtests but they are first necessary steps.

If you haven't done this then you really shouldn't give authoritative-sounding advice here.

[dictatorsunion]

In any case I am just trying to help people limit their downside by giving some simple advice. It's always better to make less money and yet be able to sleep well, then always fearing your portfolio goes to naught with some naive strategy. Not worth shortening your life by a few years with all that underlying anxiety just to make a potential 10-20% more. But definitely I would say this strategy would at least increase your upside and minimize your downside than a pure DCA, because it factors in the psychology of a bear market. Just trying to help here, I stand no gains, just don't like to see people losing their minds and sleep over losses that could have been avoided.

[dictatorsunion]

I don't test. I just trade with real money. VIX going below 30 just signifies the start of bear exhaustion. You don't go in now, it just means to prepare to go in. 200 SMA is usually used by technical traders to gauge when to start changing their strategies to trading an upward trend instead, which after awhile becomes self-reinforcing. It just experience here. You can plot the 200 SMA on the 2008-2009 graphs on your favourite stocks and you can see that usually that's a good time to buy in.

[engineeringwoke]

You should really check your tone as well. This is good advice.

[zone411]

And you know this because?

[whycombagator]

> and distribution is over with accumulation channels being formed, which is when multiple supports are being built.

Noob here. I've worked out what the rest of your post meant. What does the quoted mean?

[dictatorsunion]

It means when the market is sideways and bouncing within a channel. It is when bulls and bears are still indecisive. Depending on fundamentals as well, this is when smart money starts to accumulate. Big funds usually accumulate in these channels because they need time to accumulate. They act as the bulls here. The bears will usually be those day-trading euphoric shorters trying to scalp every bounce, or just some random capitulation. This is the time when money fears to go in and those who have held already gave up on going out. The volume will be quite low.

[Swizec]

> It is as though they have never been in bear markets before.

We haven’t. It’s been 12 years since the last bear market.

I was literally 20, in college, and with nothing to even think about investing.

How many are too young to even remember 2008?

[dictatorsunion]

There are industry-based bear markets and bear markets in other countries almost every year. They all work the same.

[thorwasdfasdf]

too late for me, i already bought the dip big time at -6%, -9%, geez.