We often hear people ask traders, ” Are you a bullish or bearish trader?”. Almost everyone has a specific favorite between the two choices.
Some of us prefer the Bullish side (Long/Buy) because we like the idea of simply buying shares when we are ready to make the decision instead of worrying about “Is there any shares to short left?”.
Some of us prefer the Bearish(Short/Sell) side because we love the total collapse of a stock once it starts to fail. What ever the choice is, it is still a good idea to at least understand whats going on, on the other side.
What many traders don’t realize is that us as traders often will mistake our “preference” for the Short or Long side, with trading in a Bullish or Bearish market.
You start trading one day and after a while you convince your self that you enjoy buying much more than selling when in reality, the market conditions at the time are just better suitable for Long biased traders because the bullish market will give you more opportunities to buy and be correct.
It is important to understand your reasoning for choosing your biased, as well as trying to be a more well rounded trader.
Here are 4 Reasons why I believe it is crucial for all traders to trade through different market conditions.
1) You Truly Don’t Know How To Trade Until You have Experienced Different Market Conditions.
I believe this wholeheartedly. Its very easy to pursued yourself into believe you are a top trader because you can make great profits in a market that is trending in your favor.
However, what is the common trend that happens to the type of trader who thinks like this? When the market turns against them, they don’t keep their money. They more times than not end up blowing a big portion of it.
Why? Because they think they can trade the same way through any market trend. The truth is the best traders know when to step on the brakes, and when to turn on the gas.
This leads to point number #2.
2) You Will Understand The Right Time To Be More Aggressive, and The Right Time To Be Conservative With Trading.
This is one trait of great traders that many people seem to overlook. This is how the great traders you look up to are able to profit a lot for a certain time, and then suffer much smaller losses over time.
They realize that you can be 100% aggressive at all times, because the market changes. Its no different than Steph Curry or most great basketball player. They can often tell within minutes of playing that today is going to be “one of those days”.
A day where he can shoot more than usual, or attempt more outlandish shots because the first 5 shots he took were all perfect. So they may average 25 points per game but in this game they think ” I am going to go for 60 points” because they know this day, “my shooting looks better than average/ my shooting is far into my favor”.
This is no different than the stock market being in your favor. If you are a long biased trader and the markets are bullish, plus you are seeing stocks do ridiculous moves, 50%, 100%, 200% gains, this should be the moment you say, ” its time to be more aggressive” and size in a bit more than usual.
When the market is not in your favor, and only 1 or 2 stocks are barely making 25% moves, then this should be an indication to use less size than usual, because the likelihood of you losing on bullish opportunistic is higher.
3) In Can Make You A More Profitable Trader/ More Well Rounded Trader
Well this should be obvious to most, but in case its not , its alright. Explanation incoming. If you can learn to make money in both a Bullish market , but ALSO a bearish market, it will instantly make you a more profitable trader, instead of being the trader that is only great in a Bull market but absent in a Bear market.
Another basketball analogy coming. The top NBA players are usually never one sided players. They’re almost never strictly offense or strictly defense.
Obviously there is your occasional one, but for the most part the top players are great at either offense or defense, but still really good at defense. Michael Jordan, Kobe Bryant, Lebron James, Shaquille O’neal, Wilt Chamberlain etc.
On top of that, because you they are not only top players, and that can play both sides (Offense and Defense) they are usually the players that get paid the most dollars (Lebron making close $80 Million in 2018).
Why?? Being well rounded means that you are present in the market, the same way a multi-purpose player gets more playing minutes. More presence in the market means more opportunity the same way more playing time often means more points and other stats.
4) People Will Look To You For Advice More Often Then Your Competition.
This is mostly for the traders who plan to open of services , blogs, YouTube channels, etc.
The more you know about different market conditions and the more you can prove that within any market you can not only survive, but make great money on either end, the more people will want to buy your product, ask for your advice, or recommend you to other beginners.
I use to watch a particular trader on YouTube religiously. Until I realized that when the market turned he was basically absent, which is fine, but it made me go search for someone else who was proving they could make money in a time when the YouTube trader couldn’t.
Your business side of trading will do much better if you can show customers that you are capable of showing them both sides of the game. Bullish and Bearish. Offense and Defense.