Looking through charts this weekend one has to notice that many are starting to look extended. A few are outright ballistic and that has more than a few people calling for a top. Some want the big top others a small one, but every day that goes by the chants get louder. Don’t get me wrong, we will get more consolidation here soon …whenever that is (whether it is in time or price is still to be seen). That is my point, none of us know when then end will come. Simple overbought readings or one ugly candle are not usually enough to derail a trend…especially one this strong. I even put out a few tweets this week with subtle warnings not to be so quick to call then end to the current run.
Being prepared to act when it does come is our jobs. While we are moving in a trend, the goal is to ride it as long as possible. Do you take profits along the way or rotate assets? Of course you do, sector trends adjust multiple times in the scope of a broad market move, but you are still trying to move with it through the cycle. Often riding a trend as it begins to feel more mature is a much harder thing to do, especially as traders. Trends have a habit of moving further than we expect, so we should be trying harder to stay on the bull instead of looking for the end. Being prepared for whatever the markets brings allows the comfort to stay with the current move, mainly because you have the comfort of knowing that you are prepared for when it does finally change. Remember, the definition of luck is when preparation meets opportunity.
As the week moved on it seemed more an more voices on the stream were getting anxious, which is not where you want to be as a trader. In my opinion, being anxious is an emotional reaction to not being prepared. I agree that time frame and trading style have a lot to do with what I see on the stream, but that is not what I am talking about. Being cautious or choosing to sit things out is a fine choice if it fits your style. What doesn’t work is continually pointing out why the market should be doing one thing while they do the opposite; that is getting anxious.
Anxiety is an emotion we all feel from time to time, but taking the time and making the effort to be prepared can all but eliminate it from your trading day. Doing your homework is where you earn your money, just so happens you get paid at a later time.
Good Luck, it is there for the making!