Stock Market

The market doesn�t wait around for you to catch up. It is a moving target, and when situations change, you must know instinctively what your next move is going to be. Many comparisons can be made between the stock market and sports. Most parents want their child to be involved in some type of sport, from baseball to basketball to football to swimming to dance. It is because sports teach us valuable lessons that we carry throughout life. Participation in sports teaches us about commitment, hard work, the value of teamwork, wanting to excel, the thrill of victory, learning to accept defeat, sportsmanship in victory and defeat, and the importance of practice. Very few people are born with the natural instinct to hit a baseball or throw a football. Some may be born with a body built for being a defensive lineman, for example, but the actual skills have to be learned. To be learned well, those skills must be practiced over and over again. When it comes to making a decision in the market, it�s very much like a football game. As the quarterback, the ball�s been snapped, it�s in your hands, and now you have to try to make forward progress. You have a split second to decide whether you�re going to throw the ball, hand it off, or carry it yourself. So what you do is react almost instinctively, as Vince Lombardi says. You have been to practice so many times that when you step back and take a look at the defense as it is coming at you, you instinctively know what the defense is and you react. The markets are the same way. The market is coming at you (trying to take your money away from you). You don�t have long to look at the position of the players on the field and decide what type of play you want to run. Do you throw the long pass (like what you would do when the bullish percent is just reversing up from below 30 percent)? Do you give it to the fullback and try to inch up the field (when the bullish percent is at 68 percent and approaching the red zone)? The markets move so much faster today than ten years ago or even five years ago (especially for the short-term trader) that these moves have to be instinctual. If a stock completes a bearish catapult formation and violates its bullish support line you should instinctively know you must implement some type of defensive strategy. The only way you are going to know how to instinctively implement your game plan is by practice. Practice looking at different chart patterns and analyzing what happened afterwards. If you look at enough bearish catapults, you will develop an understanding that this pattern usually leads to lower prices. Look at enough bullish triangle patterns and it becomes instinct that stocks usually see a nice trading pop after the breakout. Look at enough sectors above 70 percent and you�ll learn that it is an extremely risky time to be buying, as stocks almost always can be bought later at better prices. Make flash cards of the patterns; take fifteen minutes each day and study a stock�s historical chart; devote a weekend to looking at sector bullish percent charts; and do practice case studies, so that when the time comes to make a decision, you�re ready.


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