Emotions sure are running high right now! We’ve seen tremendous moves take place in a very short amount of time, and it may not be over yet. Momentum leaders like GOOG, AAPL, RIMM, and BIDU, which were only days ago running to new highs have since fallen out of bed, getting hammered with profit-taking. The directional change has been fast and fierce, and it has opened the doors of opportunity for nimble traders.
But nimble traders aren’t the ones suffering. The part-time traders are. Obviously any bull lately has suffered some pain, but that’s not what I’m referring to. I’m talking about the traders who aren’t quick on the keys, the ones who are just trying their hand at some dip buying [1]. They don’t realize the sheer panic of so many other market participants which they’re buying in the face of. They don’t realize that even on a bounce bulls can become sellers [2]. There’s a lot of supply just waiting for a chance to get liquidated once some relief comes along and higher prices are seen, and that’s precisely what can bring the pain to the uneducated part-timer.
There’s a huge urge for traders to catch market turning points, probably because so many traders fail to check their ego at the door [3]. That desire can cause a trader to step out of their usual routine and attempt to catch a falling knife like this market or call a top when things get stretched to the upside. Rarely does it pay off. Usually it costs some money and objectivity, and what mojo you had before will quickly disappear.
This is an incredibly volatile market right now, and it’s no time to be trying new aggressive strategies (such as trying to buy the low). Your trading objective is to stay patient and wait for the conditions to arrive which suit your trading style. If you don’t see those conditions, then don’t play. Wait patiently and spend your time tending to other matters. Because the truth is, eventually this phase will end and a new one will begin which may be far more suitable to your trading style. Being willing to sit out volatile times like this will preserve capital and allow you to resume profitability once your ideal conditions surface again.
Shun the urge you may have right now to add new trading styles to your arsenal. Stay focused on what you know, and if you don’t see it then be willing to wait.
Jeff White
President, The Stock Bandit, Inc.
Swing Trading & Day Trading Service
www.TheStockBandit.com [4]
[tags]Stock Market, Day Trading, Stock Trading, Investing, Swing Trading[/tags]