Editor's note: Trading is all about discipline... For an investor, there's no better feeling than formulating an investment strategy, executing it when the opportunity arises, and earning consistent returns by staying true to that strategy. But investors often ignore what's working in pursuit of larger returns... That's why Ten Stock Trader editor Greg Diamond urges investors to understand when to get aggressive and when to remain patient... to avoid wasting their hard-earned profits. In today's Masters Series, originally from the July 24, 2023 Weekly Market Outlook issue, Greg explains why knowing when to attack and when to play defense is critical to making sound investments... talks about an index that can help you determine which approach works best for the current market... and shares several offensive and defensive strategies that can enhance your investment decisions...
Successful Trading Requires Both Offense and Defense By Greg Diamond, editor, Ten Stock Trader Whether it's your first time putting on gloves, or you've already won a title belt, the No. 1 rule in boxing applies to everyone... Protect yourself at all times. When I first stepped into a boxing ring, I learned that lesson the hard way. I had trained for nearly a year before entering the ring... And as soon as I did, everything I had learned (or thought I had learned) vanished in the blink of an eye. I was so focused on hitting my opponent that I forgot the No. 1 rule. As a result, I took more than a few hard punches and ended the bout with two black eyes. From that point on, I completely changed both my mindset and my strategy. That reset allowed me to enjoy boxing much more... with fewer bruises. You see, I had to learn when to play offense and when to play defense. Many boxing enthusiasts call the sport the "sweet science," a term first used by English sports writer Pierce Egan back in 1813. It refers to the scientific strategy boxers use, and it focuses on how to defeat your opponent before actually beating him. While the sport does require physical strength and dexterity, the mental part is just as important – if not more so. Trading is similar to boxing. You have to train your mind, practice discipline, and figure out when to get aggressive and when to remain patient. Too many traders lose money over the long term because they don't know when to pull back. Like my first time in the boxing ring, they're always in attack mode. So today, I'll focus on how offensive and defensive strategies can help us make smart trading decisions right now... and avoid big losses. We'll look at one important index to explain where and when we can employ tactical trading strategies. And we'll discuss why patience is crucial right now, based on key technical setups. Let's get started...
| Recommended Links: | |  'Aftershock of 2022' Is Coming On February 14, an "aftershock" of the 2022 crash could cost you all your recent gains. That's the newest prediction from Greg Diamond – who called the 2020 crash to the week... the 2022 crash a day before it began... and last year's turnaround within 24 hours. But if you know what's coming, you could double your money 10 different times, without buying a single stock. Click here for the full details. | |
|
As my Ten Stock Trader subscribers know, there's a right time to be offensive and a right time to be defensive... Both approaches require you to remove the "perma" bias from your mindset... If you're a permabear, that means tempering your market pessimism. If you're a permabull, that means toning down your staunch optimism. In other words, you need to focus on what the market is doing rather than what it could do. With this in mind, let's look at the Nasdaq 100 Index... 
The Nasdaq 100 is well above the major moving averages. I've marked the 55-day moving average ("DMA") in blue and the 200-DMA in red. These lines show the short-term and long-term trends, respectively. Folks, it's clear as day... We're in the middle of a bull market. Now look at the relative strength index ("RSI") at the bottom of the chart. The RSI is an indicator that shows when assets are "overbought" or "oversold." When values move too far, too fast in either direction, a reversal is likely. The red circles highlight where previous tops have led to corrections. These corrections aren't steep. But they did lead to higher prices once they ended, which is the key point. Is this the kind of setup that prompts you to get aggressive as a trader? Probably not. Playing offense in this environment is like a tired boxer entering the ring and throwing haymakers while his opponent sits back, waits for a counterattack, and then knocks him down. We need to know when to be patient. Many traders only focus on how much money they could make. Others want to trade every wiggle on every technical chart without considering what could go wrong. And in trading, things always go wrong. Those who think it'll always be a smooth ride are in for a rude awakening. If you're out in the boxing ring for 12 rounds, there's no avoiding it – you're going to get punched. These signals are telling us that the current rally won't be a parabolic rise higher. That means we shouldn't expect a clean vertical rise with no corrections. So in the short term, we should think like professional boxers. We should practice patience, prepare for a counterattack, and trade tactically. That's exactly what I plan on doing. Good investing, Greg Diamond, CMT
Editor's note: Greg predicted the COVID-19 crash, the 2022 market crash, and last year's market turnaround. And he recently stepped forward to share an urgent new warning about what's coming next for investors... Greg hosted an online presentation to reveal a massive shift that's about to take place in the markets – one that could double your money 10 different times, without buying a single stock. Click here to catch up on the full details... | 
No comments:
Post a Comment
Keep a civil tongue.