There are many mental attributes that one must have to be a trader. All the time we hear about fear and greed as the two strongest emotions that move markets. While this is true, it is important to remember that it is not that simple if you want to succeed. Every professional trader must express one very important characteristic, and that it patience. This becomes even more important when you get to a more challenging market environment like we have today.
During the bull market run it was easy to be aggressive on the long side as the market would usually bail you out if you were wrong. These days we are seeing thousand point swings in the Dow Jones Industrial Average (DJIA) in a single trading session. This is a time where traders must now exercise patience and take trades when the chart patterns tell them to do it. Think about it, you never know what you are going to wake up to from day to day, that is why what I am discussing with you now is ever more important for you to focus on.
These are markets that can rally on good news and fall sharply on bad news. Remember, the trend is now down and that is still the path of least resistance. On the other hand, we are dealing with severe oversold conditions and lots of stimulus by government and central banks.
So what do we do?
To make money and limit risk we must look for the best chart pattern setups that present themselves. There are many stocks that are showing good relative strength; they would be the stocks that I watch most closely. If these stocks give you a good chart pattern then they could be bought. Stocks that are not showing relative strength should be avoided. The bottom line, be patient in this environment. If you are unsure then just sit tight and do nothing. Remember, opportunities have a way of presenting themselves when you are patient.