How often do you start your day with anticipation and excitement to see what the stock market has in store for your account? Watching the market go higher and producing bigger returns for your account is fun and exciting! Ideally we want to see our accounts grow larger everyday except they don’t. That’s just the ups and downs of the market. What is the proper response to a down day? How do you recognize when all is lost and decide to abandon ship? As you know, some days can get really ugly! Well, in this article let’s examine how you react vs. how you should react. Let’s also look at what kind of things drive the markets and how to calculate and identify the proper response.
As the article suggests, I want to introduce you to the opportunity mindset. When the market isn’t going your way, it’s easy to make quick and irrational decisions. Maybe the Fed says something that spooks the market and it drops 600 points in an instant. Suddenly, you start telling yourself this is the end. You’ve had a good run, but it’s time to sell all and get out while you have a shred of profit left. Stop! Don’t be so fast to judge the situation. This is generally the difference between being profitable and losing money. Take time to examine the news and remember the market ebbs and flows so to speak. In most cases, drops like this are temporary. This is driven by all sorts of factors and this is where you need to start changing your mindset. Change from the irrational fear driven mindset to the opportunity mindset. Ask yourself why is the market down? Is it news driven? Are people just taking some profit after a big run? Is it out of some irrational fear because the Fed said something that scared people?
Whatever the case may be, start viewing these drops as an opportunity! It can be very counterintuitive to think “buy” when the market is selling off, but more often than not, this is exactly the time to buy or consider doubling up on your current positions. Obviously you have to do a little research and make some calculated decisions. But start training yourself to see opportunity in those big market drops. As you can see from my own chart on the left, don’t get discouraged when you’re in a bit of a rut. If I bailed out every time the market dropped(and I used to), I would have lost a lot of money. This is why we swing trade. Give your trades time to work. If you’ve researched and picked well, you’ll see your account start growing.
All that being said, we don’t want to give the impression you should never bail out on a stock. There are times when it makes sense and perhaps we’ll cover that subject in more detail in a future article. The times I consider selling are when a stock is tying up my money and going nowhere or a large drop that continues day over day. This is something you have to decide for yourself.
If you’re struggling to be profitable or you just don’t know what to pick, we can help! Check out our premium stock picking service. You can pay month to month and cancel anytime. The market is a Zoo!