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Published: July 7, 2010
The great thing about being a trader is
that we can be very light on our feet. You don't have to worry
about getting out of a position. You are not married to stocks,
like value investors.
Being opportunistic and attentive to the vagaries of the market
make you far more able to move to cash and back into the market
when the timing is right. What you don't want, however, is to
become a victim of whip-sawing, which tends to get you out at
the bottom and in at the top. What you want is just the opposite
-- buying low and selling high. Following my
10 Rules for investing could greatly reduce
portfolio-crushing, whip-saw trading.
One of the best ways I know of making the right plays at the
right time is to follow what I call the "Life Cycle of
Investing" strategy. This is a four-part strategy I use all the
time, which includes:
1. Have the right bias -- This is where I decide whether
I should have a short bias, a long bias, or a neutral bias. My
time-cycle forecasts provide me with an 80% probability of
correctly identifying whether the market is likely to head
higher or lower, to the day, for the next 90 days on a rolling
90-day basis. This comes from my own proprietary system. I share
some of these charts in
Trade of the Week and even more of them in my
Mastering the Markets letter.
2. Pick the right stocks/ETFs for the right bias -- I
have developed a system that continually analyzes 8,000+ stocks
and ETFs, looking for equities that have the best combination of
fundamentals and technicals for the right market bias.
3. Follow a disciplined approach to
trading -- I am a rules-based trader. I make the rules, but
my rules make the trades. These rules are detailed in my book
and form the foundation and backbone of how I get into and out
of trades. They tell me what to consider buying, when to buy and
most importantly, the perfect time to sell. I strongly suggest
you either follow my 10 rules or develop your own set. But
regardless, if you want to be a more successful investor, the
more disciplined you are in following a solid set of trading
rules, the better your portfolio could perform.
4. Time the market -- You can pick the right stock, the
perfect stock, the one with the best fundamentals and technicals
at the wrong time and lose money. Sometimes a LOT of money. And,
that's just the getting into the trade part. The hard part...
the really hard part, is getting out at the right time. Compared
to buying the right stock at the right time, selling the right
stock at the right time is far more important. After all, the
only time you make money in the stock market is when you sell at
a profit.
Action to Take --> My
forecast charts for the summer look bleak, but that picture
looks optimistic when compared to the forecast for 2011. It's
exactly times like these when traders need to have a set of
rules to trade by. If you don't, the results could be dire. (If
you don't already have a set of rules to trade by, I recommend
my free course,
10 Rules for Beating the Market). Those that do have a
set of rules, on the other hand, can seize the opportunity and
potentially make money in any market.
-- Mike Turner
Editor,
Mastering the Markets,
Trade of the Week
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