While having a temporary bias can be understandable, it can still have a negative affect on your bottom line. For instance, the multi-year decline in the DOW had turned many otherwise objective traders into hard core bears. Naturally those who were short stocks from early October 2007 were right on track, especially when we saw the market nosedive below 7,000!

Now if those same bears stayed short they have had their profits eaten into quite substantially, but even that is not the point. The big quesiton is what do we do when we see the market change direction, which it started to do in March and April of 2009? Do we remain bears and stay short waiting to reclaim our profits eroded by the current uptrend? Some would say yes.

One important thing that we have to remember is that the best indicator of market direction is the direction of the current trend. There is no real reason to stick with a stock trade that is moving continously against you in hopes that the market will eventually go in your direction.

The entire point here is that effective stock trading requires flexibility. Sometimes that flexibility invloves admiting that your original trading signal was wrong. After that you may have to trade in the opposite direction…and that’s OK. Our objective is to trade stocks profitably and not necessarily to feed our pride or our egos. If you maintain your objectivity and flexibility your opportunies for profit will continually multiply and you will trade more successfully than you ever imagined!

Naturally,  all this remains to be seen as we all find ourselves getting ready to feast for the Thanksgiving holiday. It will be interesting to see if Black Friday is as big a shopping day as has been anticipated by some analysts.

It remains to be seen if investors will lighten their load and sell off some of their holdings in an attempt too calm their nerves as we approach the end of the year.

Have a Happy Thanksgiving!