Understanding Trending and Range Bound Markets
For many of you, your trading and investing career is just beginning, and for others like me, it has been going on for a long time. My career began during the greatest bull market of all time, from 1990 - 2001. That market taught me a very important lesson that I want to share with you. It will help you understand trending markets, range bound markets, and above all, help you to control your emotions.
If you have been watching the stock market at all since late 2007, you have seen a period of high prices followed by a severe sell-off during 2008 and 2009. Hopefully, you did not buy or hold any stocks during this time, but if you did, you should have learned a valuable lesson. This lesson is no different than the first time you touched a hot stove as a child after being told not to do so by your mother. Like that experience of getting burned, this experience will only be helpful for you if you remember it the next time prices are high and everyone is telling you they are going much higher. This lesson is the focus of today's piece. It is applicable to any market and time frame you choose to trade.
If you have been watching the stock market at all since late 2007, you have seen a period of high prices followed by a severe sell-off during 2008 and 2009. Hopefully, you did not buy or hold any stocks during this time, but if you did, you should have learned a valuable lesson. This lesson is no different than the first time you touched a hot stove as a child after being told not to do so by your mother. Like that experience of getting burned, this experience will only be helpful for you if you remember it the next time prices are high and everyone is telling you they are going much higher. This lesson is the focus of today's piece. It is applicable to any market and time frame you choose to trade.
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