The market has been on a pretty big bullish run over the past couple of months. As a trader, how do you not focus on more bullish than bearish trades, right? The market is due to pull back at some point, of course. Still, there will always be traders who focus only on bullish trades (yes, even when the market is heading south). Let’s look at why that may be the case.

Most Traders Think Bullish

One of the first things I ask traders, especially in a bullish market, is, “have you taken any bearish trades?” The answer all too often is “no” or “just a few.” The reason many times is they have an investor’s mentality. Most investors buy stocks in hopes they will go higher. Most don’t short shares hoping to buy them back for less than they were sold, at least for more than a day trade. Many traders have it in their heads to always assume stocks will go higher, and they bring that same mentality to option/swing trading.

Market Is Often Bullish

For the most part, the market does seem to move higher, or at least not a whole lot lower, in the long run, especially over the past couple of years. Many major indexes have set recent all-time highs over the past few weeks. These factors also contribute to a trader’s bullish mentality. Many stocks have moved higher if you go back 10 or 20 years (unless you have been long growth stock the past two years or so). I have heard lots of stories from my students who have held stocks for years and are now sitting on big long-term gains. No wonder it is hard to break the habit.

Final Take

By no means do you have to force bearish trades if the market is moving higher or you are not comfortable doing so. Just don’t force bullish trades if the market is on a bearish run. Sit on your hands. Breaking those bullish thought patterns is a major step and will allow you to profit under any market circumstance.

John Kmiecik, Market Taker Mentoring