This is the reason why I trade. I love making a trade and coming out on the right side. But when things don’t turn out quite right, you need to fess up to your mistake and walk away from a bad trade in the stock market. This will help you move on to your next trade and avoid any major investor mistakes chasing a stock lower.
Trading in the stock market is not about gambling—don’t get the two confused.
Trading involves careful analysis of the stock market and not just simply throwing your money down on a roulette table and hoping the little ball lands on your spot.
Even now with the risk in Syria, the forthcoming bond tapering, higher interest rates, the continued stalling in Europe (NYSEARCA:VGK), the lack of job creation, and the absence of revenue growth in corporate America, the market is trading like everything is on target and nothing is wrong.
The non-farm payrolls reading for August was soft, and the downward revision of the July headcount was abysmal. People still need jobs and lots of them, so everything is not as rosy as you might think.
I call the current bullish stock market sentiment nothing more than hopeful optimism; it’s not based on the stock market facts.
The only positive is the low comparative bond yields, and the historically low interest rates are the only thing holding up the artificial economy created by Chairman Ben Bernanke and the Federal Reserve. It’s amazing that despite trillions of dollars of stimulus, the country’s gross domestic product (GDP) growth continues to drag below three percent.
And don’t forget about the staggering national debt that is closing in on $17.0 trillion—yes, that debt! There is still no progress on what to do while the debt mounts.
Can you imagine what is going to happen when interest rates begin to ratchet higher? Because, like I’ve written in these pages before, they will ratchet higher—so it’s not a matter of “if,” but “when.”
And what about the massive debt, carried on homes and purchases by Americans, that was accumulated in the low-interest-rate environment? It’s not going to be pretty!
Don’t get me wrong: I still like the trade, but you need to be careful. If you make some quick profits on a day or swing trade, exit and move on. Buying and holding is not recommended at this point.
This article is brought to you courtesy of George Leong from Investment Contrarians.