One of, if not my favorite trader blogger, Carl Futia, is right on the money, I think. Oh, sure, he could be wrong — we all can always be wrong — but what’s important is that the price for being wrong can be minimal (you’ll know soon enough), but the price for being wrong in the other direction could be very costly indeed, in terms of missed opportunity.
So, yep, when you see the doom and gloom headlines and stories regarding the market, at least consider a couple of possibilities beyond the conventional (crowd) "wisdom" that the sky, or a part thereof, is falling. The first is that these sorts of sell offs and the ensuing panic and ominous headlines and stories are very advantageous for those interested in dumping a bunch more money into the market. What better way than to take advantage of everyone getting scared out of their positions and selling cheap?
The other possibility (separately or in concert) is to consider that it is the "job" of the media, in general, to "report" to you what you want or expect to hear. That makes you feel smart, vigilant, on top of everything; someone not about to be fooled until the very moment you have been fooled.
The problem of induction
can be used to one’s advantage in trading. For example, we could see ten 5-10%
corrections in a row end up being buying opportunities, but that says nothing, deterministically, about how the eleventh correction will turn out. On the other hand, you
don’t want to bet against such a pattern of successive occurrences (and
many do, and I have too, stupidly enough). What you can do is place a
small bet in the direction of of the pattern, and then — and this is the
most important part — focus only on falsification. Look for every
reason why this time may be different. It’s far easier, and quicker, to
know you’re wrong than right. Essentially, you’ll not know you were
right until the entirety of the correction has been recovered and the
market is exploring new highs. But you can know it’s not going to be a
normal recovery pretty quickly, in which case, at minimum, you can take a small loss on a small bet. Then, if you’re daring, you bet exactly the opposite way and then do the same thing, look for how you might be wrong.
Always focus more on facts that falsify or contradict your prediction, because successive confirmation can never confirm certainty until the full potential of the prediction has already come to pass — and it’s too late to place a bet then.
This is the only sound and valid way to apply the correct scientific method to the business of trading or speculation. If you’re astute, you can probably think of a million ways this could apply to your everyday life.