PHO TOGRAPH: DAN SAELINGER | ILLUSTRATION: RANDALL WATSON
• WHEN MARKETS ZIG strongly one
way, and then suddenly zag in the
other direction, investors get hurt and
traders sometimes freeze in a state of
“analysis paralysis.” They make hasty
decisions, and their tidy profits disap-
pear. Of course, there’s no way to know
if a reversal is merely a correction or
something bigger. But big or small, in
the heat of things, the roller coaster just
feels bad. You might even panic and sell
all of your positions.
But that may not be the smartest
move. How often have you exited your
positions, only to see others simulta-
neously loading up on new ones? And
what happens next? The market moves
right back to where it was before the
correction and continues on its original
path. It’s happened time and time again.
As a trader, your primary responsibil-
ity should be to protect your positions.
Always. Since it’s impossible to predict
what the stock market will do, a logical
plan of action would be to position
yourself so you can profit from rallies
and hang in there during corrections.
Generally, bullish rallies are long and
bearish ones tend
to be short and
quick. How can
you profit from
such a market?
“How to Save a
Bear in a Herd of
Bulls” on page 16
gies to use if you’re
a bear in a bull
market. These strategies help you take
profits when you need to. But there’s a
catch—you have to do it before the mar-
ket takes those profits away. Otherwise,
you might get trampled by the bulls.
It’s been said that fear and greed
drive our trading decisions, which are
dictated by crowd action. This is all
mapped out on a price chart, which is
Think, Plan, Prepare
why it may be worth training your eye
to detect price patterns that suggest
when crowds are united and strong.
“Five Chart Patterns for Momo Traders” on page 28 shows some common
patterns that can help find where the
action is. Not all patterns will work the
way they are supposed to, but it never
hurts to have more tools to help make
entry and exit decisions.
So, when the markets make wild
swings, it would be wise to remember
why you got in the trade in the first
place, don’t let your emotions get the
best of you, and execute on your plan for
when things go wrong.
TALK TO US!
Ask a question,
tell us a joke, or
just give us your
Write to us at