Four sesons of Stock Trading
Like the seasons of nature. there are also seasons in trading.
Winter: Cash and Shorting
Markets are in downtrends, there are no clear leading stocks.
The moves are volatile wide, and loose. There are no stocks setting up.
Time to sharpen your saw.
Reflect on your trading plan. Use Winter to improve your skills and knowledge.
Go over your trade journal.
Read or re-read the best trading books you can find.
Watch interviews with the best people that trade your style.
Get better at what you do.
Spring is just around the corner so do not lose hope and keep getting ready for it.
What you do in Winter will make all the difference in fall. T
his is Stage 4 Decline.
Spring: Put some Money to Work.
Spring starts to show some stocks are setting up.
These first ones may be the next True Market leader.
Markets start to move higher on seemingly bad news.
The 50 and 200day moving averages are beginning
to flatten out with price above them.
Price action begins to tighten up.
Put some cash to work and manage risk. This is Stage 1 basing /accumultion.
Summer; Increase exposure
Summer has the Index 50 and 200 day moving averages moving higher.
There are many stocks setting up and breaking out.
Breakouts are working. Growth stocks are acting well.
The market is more forgiving .
This is the time to be fully invested or more.
This is the Stage2 advance.
Atumn: Take profits, Mange Risk.
Autumn starts to show increased volatility and wider price action.
Growth names are not acting as well. The indexes begin to test their 50
and 200 moving averages and they begin to flatten.
This is the time to lock in any remainig profits and tighten up risk management.
Winter is coming. This is Stage 3 topping.
The Season of the Market will determine How you trade
How we identify and react to these Seasons(stages)will be the direct determinate of
how successful we are in the market and
ultimately we measure success by our equity curve.
Don't lose hope in Winter
because we know Spring always follows and
there will be another Summer in our future.