Business & Investment

Seven important lessons learned from swing trading in 2020

Transactions learned in 2020

Today, I would like to talk about what I learned from the 2020 “Pandemic Bull Market” deal.

Yes, that’s what I call it.

It may not be catchy, but it’s exactly what I see.

Focus: Trade lessons learned from historically turbulent years will make us a better trader.

I love learning from the market. I keep a diary of trading lessons that are constantly evolving. I think success is directly related to learning and putting into practice the lessons learned from the market each year.

As Peter Drucker said, “learning is a lifelong process that keeps up with change.”

The man was working on something when he said this.

Unlike many other areas, the market is constantly changing. I can’t blindly do what I did yesterday and I think it will work tomorrow.

Therefore, we accumulate data, analyze it, and adapt it. always.

In 2020 many traders learned this in a difficult way. What has been the bread and butter movement of the last few years has not worked. Many people were embarrassed by the market because what seemed logical failed. Those who did their best quickly identified this concept, made changes, and adapted to new trends.

Today we will share with you the 7 most important lessons from 2020. These are lessons in my own journal.

Lesson 1: Ignore the news

Throughout the year, I was told by a non-trading friend that I needed to sell everything. With every Trump tweet and Covid spike, the world was about to end. Economists correctly predicted that the economy would stagnate.

So the market was put in a tank, right?

We all know that wasn’t the case. In fact, after the collapse of the pandemic in March, the market continued its historic bull run.

This all happened in the midst of horrifying news. It didn’t make sense. How can the market continue to rise while the horrific virus kills us and people are losing jobs at levels not seen since the Great Depression? We’ll cover this in Lesson 2, but the point here is that you need to ignore the news and follow the pricing action.

Again, follow the pricing action and ignore the news.

Lesson # 2: Markets try to predict the future

There are two types: those who live in the past and those who look to the future. If the market is people, it would be the latter. Mr. Market doesn’t care what’s already happening. It has already priced the equation.

For the market, the present is determined by the future.

This concept is illustrated by the movement of the entire market in 2020. Looking at current data, the market is below the March pandemic lows.

Instead, the market is the best ever.

That’s because the market is looking to the future. It knows things are bad, but doesn’t believe they remain bad.

And that’s why, even in the worst of situations, you’re not afraid to go long. If price behavior tells us that the market thinks things will be better, we look to the future.

Lesson 3: The market moves based on hope, not reality (selling news)

If you need big results, do your best.

The biggest motivations for 2020 had one thing in common. They made big moves based on hope, not reality.

This may be the biggest lesson of 2020.

Some of the biggest moves in 2020 were biotechnology stocks working on vaccines, electric vehicles, solar and IPOs.

A common thread between these big moves was hope. Expectations for great results. However, the results often slowed down or sold out.

Vaccine play is a good example of this.

Moderna made a historic implementation in 2020 as it worked on the Covid-19 vaccine. The day when it was announced that the vaccine was ready was a spectacular moment for the strain (and the world). At this point, it was clear that the company was one of the winners in this area, making billions of dollars.

However, the stock price plummeted after the announcement, hitting a pre-announcement high of $ 178 and is now 75 points below its peak of $ 103.

This is why I want to exchange hope and sell results.

Lesson 4: Speculation rules in a soaring market

Follow the junk whenever you are trading in an overheated market.

That’s because when the euphoria strikes, the junk goes up. Stocks, which plunge rapidly and become ignored a year later, are now the darlings of the market.

Consider riding the wave of recent IPOs, non-profitable stocks, and epidemic stocks in the speculative field. They are stocks that perform insane practices.

However, be careful. These are also stocks with spectacular drops.

Lesson # 5: Strength produces more strength (RS)

I remember always looking for value when I first started trading. I bought “cheap” stocks and wondered why they continued to underperform when the expensive stocks made a lot of money.

That is because strength produces more strength. A bullish run is guided by a leader of relative strength.

Active stocks tend to remain active.

This year’s market was led by a number of stocks such as Zoom, Tesla and Coupa. These stocks were relatively strong leaders throughout the year.

In hot markets, make a list of leaders. Most of your transactions should come from these stocks.

Lesson # 6: Expanded Market Expands Further

I love the extended market. That’s because there are opportunities when you look at the expanding market. This is the opposite of the number of traders looking at the overbought market.

They will be scary.

That’s why you need to throw that fear aside and prepare for the deal. In hot markets, the market moves irrationally. In fear, they climb the “wall of worry”.

Often this is the best time to get longer.

It may not make sense, but take a look at the 2020 chart. What you find most of the time was when the market expanded and it was a good buying opportunity.

Lesson 7: Don’t overreact to short-term news

Do you always remember that the market fell in the morning due to Trump’s tweets this year? What about turning red after business hours due to horrific Covid news, unemployment, or blockades? What about all the strong stocks that took a temporary dump for earnings or news events?

Unless you have a photo memory, you probably won’t remember many of these moments. The market went well. Most of the stocks of relative strength overcame temporary dumps and Covid News was eventually ignored.

The momentary depression was an overreaction.

This is one of the weirdest challenges in the market.

We’ve already established that it’s positive, but in the very short term, it’s scared from the head by current news events that don’t make much sense in the future.

I learned this concept very early in my trading career. Don’t be fooled by overreaction to short-term events. In fact, they often offer great opportunities.

This is a big lesson for 2020. Now it’s time to put them into practice in the New Year!

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Seven important lessons learned from swing trading in 2020

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