Mark910: Calling the Top.......Who cares? Why you should.

Here is a great post by my friend and fellow blogger Mark910 --- Buen ' Dia', Oct 26 : Calling the Top.......Who cares? Why you should.

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"...We should start by defining "TOP". To a trader, the top can mean simply a high from which the market retreats for some period of time and is therefore tradable. In fact, to a day trader, the top can mean high of the day. However for purposes of this article I choose to define “The Top” as - the time period in which an investment is worth at or near its maximum to which it will not return for a period of time measured in years that are unacceptable to the investor. Thus there is some leeway in the definition for investor’s circumstances. To a trader, prudently trading with a small percentage of his net worth, a 50% drop might not be the end of the world. And yet, to a pensioner who is past his productive years 10% might be huge. A drop in the market, for instance, of 30% requires a 50% increase to get back to even. The S&P dropped about this amount in both 1970 and 1987 and it took 2-3 years to recover. In 1973 and 2001 the S&P fell 50% or so. In both cases the recovery took about 8 years. Even a retracement of a 20% correction could take years. ..."