Up, Down, and Flat Markets
The market goes through periods of up, down and flat trends. Up markets are the most fun and easiest to trade since the vast majority of stocks are going up. I was researching "investment clubs" yesterday with Google; I wanted to find active clubs to send a free copy of my book. I was surprised to find that there were hundreds of clubs, but most of them were now dead or inactive. It seems that there was a club boom from 1998 to 2000. The market then crashed and the investors gave up. It helps if an investor is mentally ready for all types of market conditions. The big dangers in an up market is the euphoria of thinking you can do no wrong. You can be tempted to make poor trades because everything you try is working. Stick to your plan.
Down markets are mentally difficult. They test and retest your mettle. It takes self-discipline and fortitude to be able to watch money catch on fire and not blink. You really have to believe that what you are doing is correct. It's almost impossible to follow a guru's advice in long periods of decline. You must believe in yourself and in your trading ideas. I try to step back, look at the big 100 year charts and say "in the long run, the market goes up 8%-12% a year". I continually reinforce this. The other thing I try and do is "beat the indexes". If the nasdaq or dow drops 15% in a year, and I drop 8%, that is a big win and I am doing something correct. Invest for the long run and be steadfast in your ideas.
Sideways markets are boring and frustrating. They often tempt investors into "adjusting" their system. Just ride them out. They are not fun; at least they are not painful like down markets. Again you must believe in your ideas and stick with them. If you can stay flat when the market is down, you are winning. If you can make 3% when the market is 0%, you again are winning. Winning traders are not always making 15% or more each year; their portfolios fluctuate up and down and form and average that is higher than the market average.
