Buy-Hold Strategy Versus Trade With Trend

The dysfunctional global financial system is a riches to rages tale, where even billionaires around the world have suffered billion dollar losses while market participants are salvaging whatever is left of their investment. With the dip in global markets and the gains from the commodity bull run fast being erased, should market players wait on the sidelines or should they look at their game plan again?

Traders fell there are trading opportunities but they are generally bearish on the market. The buy for long term strategy will not work in the current market (2009), they opine.

Buy and hold strategy adopted by most investors is archaic. Investors with this strategy will look to exit investments only if they could sell at a profit. With markets heading lower, investors are struck as their only option to exit is closed due to weaker stock prices.

Investors governed by buy and hold game plan believed in the notion that markets will always recover. One needs to hand in there and eventually do well … but that is not the case when the Nikkei index is still 80% down from its 1989 peak.

To a certain degree, it is irrelevant as the market will do what it will do rather than we would like to do. It does not matter how much we think the market has bottomed out as all that matters is that one day it will bottom out. In saying that, it is believed that most markets hit the bottom around Nov 2008, but this is still to be confirmed.

As traders, the only two things we can control are getting in and out of the market. It is not out job to pick the bottom of a market or a share but rather trade with TREND. Therefore we can sit back and wait for the opportunities as they arise.

PATIENCE IS VIRTUE