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They can adjust their style to fit the type of snow they are skiing so that their performance does not suffer no matter what the conditions. While they may have a preference, they do not complain when the conditions happen not to meet their preference. |
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Likewise, flexible traders know when the market calls for grinding out fractions because that's all they're going to squeeze out of it. They can be comfortable doing day swing trades for a few hours or position trades for a few days or weeks. They will ideally even have some long-term positions to balance their portfolio and to balance their thinking. |
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Psychologically, it is much easier to think like an investor when you have some longer-term holdsin other words, when you know how it feels to hold a position over time without undue anxiety or worry. In an earlier chapter we mentioned being able to adjust our view of what began as a short-term position into a longer-term positionwe called this reframing our view of the stock. Most investors find they are forced to change their thinking when a stock drops and they don't want to (but probably should) sell it. But wouldn't it give us a greater feeling of control to be able to choose to hold it for a longer term rather than be forced into this position by default? This, of course, is what investors do all the time. |
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In addition, flexible traders know when the market is telling them it is best to keep their powder dry and stay on the sidelines. As we all know, there are sharp, violent sell-offs at times that only traders wanting their heads handed to them on a platter would consider jumping into. |
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Smart traders know how to let the dust settle when things take a sharp down-turn. This allows them to increase the probability that there will not be further selling and they do not end up getting in the way of the proverbial falling knife. The greed of getting a good deal has to be balanced by the prudence of restraining oneself until it looks like a bottom has formed. This is why many traders say it is best to wait until the stock begins to come back up before considering taking a positionnot while it is still falling. |
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Example of Flexible Thinking |
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In December of 1999, the technology sector had been on a very hot upward spiral for over a month, since the market had been consumed with interest rate fears, causing a sell-off in October. James Cramer, referring to this period, unequivocally called this market |
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