"Panic is not a strategy. Nor is greed" or should you now close your short positions?

Today's volatility is a great thing if you are a short-term trader. More to that, it is essential for you.

These days, the rangebound sessions that put their mark on most of the year seem like a distant memory, and for those looking to scalp profits, the time to panic has not arrived yet.

For generally passive participants who now feel the need to shift their approach, Liz Ann Sonders of Charles Schwab, in a post titled “Panic is not a strategy, nor is greed,” offered this chart to remind them of the lure of the long term.

“Individual investors should be price-sensitive buyers and sellers. We still strongly believe that over the longer term, fundamentals will define how markets behave,” she said.

“You can see the power of long holding periods when it comes to minimizing downside risk. The longer you extend your time horizon, the less likely you’ll experience a loss over that holding period.”

Although it makes sense, it does not necessarily make these falls easier to stand. What if John Hussman's crash prediction is true?

“Can you tolerate a 40-55% market loss over the next 18 months or so?” he asked. “If not, take this opportunity to set things right. That’s not the worst-case scenario under present conditions; it’s actually the run-of-the-mill historical expectation.”