Stand aside when markets rise

Over the years I have seen traders stand aside when they should be trading.

In most cases, the reason traders have decided to stand aside is the belief that there is uncertainty in the markets, or they do not know which direction the market will go in, or because they may lose money during a pullback.
However, it is probably more because it is the fear of being wrong.

The fact is, we never know what the market will do so, on that basis, should we always be standing aside?
Of course not.

To beat the market is difficult - and requires doing things that will feel uncomfortable, especially when most others are doing the opposite.
Warren Buffett will sometimes go into a position that will remain negative for years before finally turning around.
Does he waver when others are not doing what he has done or perhaps even are doing the opposite?
I'm going to guess one of the world’s richest men does not budge from his belief - and that's probably one of the reasons why he is such a good investor.

Going against the trend can be very profitable but, at the same time, can produce unwanted results.
This is when stop losses are applied to stunt those negative results.

As you know, we had bought into ZM as the market was crashing in March 2020.
The entry for this stock was at the worst possible time in the history of the stock market.
Never had the stock market declined so fast and never had we experienced this wave of a pandemic taking over the globe.

So buying 11 trading days from the S&P 500 high (while the market was continuing to accelerate down ever faster) never felt like a smart move - but it did look a logical one.
As of now, ZM happens to be one of our best winners so far this year.
If we had listened to the media about the doom and gloom in the markets and that they will be bearish for years to come and that ZM security issues will cause ZM to crash and the ZM price levels do not make sense, then we would have watched and wept as price moved up without us.

What we are experiencing in the markets now is very different from what we had experienced in March, yet that feeling of panic continues to be in certain corners of the media.
Of course, at some point, the markets will move into bear territory - but each time we have a pullback, we can more often than not assume it is more likely a breather than a bear market.

Pullbacks happen often, bear markets don't.

Again, stops will prevent that position turning into a large loss if the markets do happen to turn bearish.
For our safety, stops allow us to get out of a trade should the markets fall.
We can also take smaller size positions when in doubt.
So remove the fear and remember that we took ZM at the worst possible time in the whole history of the markets - and it proved many experts wrong.

Things you should do:

• Rely on CoE

• Let the market guide you

• Trade what you see, not what you hear

Things you should not do:

• Listen to the media

• Take large positions then pray it works out

• Be afraid to trade during pullbacks at support zones

Standing aside when markets rise is not wise.
Remember that.
CoE is required for a pullback set-up to be valid but, at the same time, the market decline needs to be showing some sign of abating.
This is often in the form of volume, momentum, chart or candlestick patterns.
Without some, or all of these elements, the probability of success may end up being less than desired.
If there is a good stock set-up, but markets are still declining, test the position with a reduced size and if it works out, be sure and add to it.

Let's go trade!