Here is a quick but important post about remembering what type of market we are facing and why many traders always think about bullish trades…even when the market is heading south. Let’s face it, it has been a less than stellar bullish year thus far. That said, many traders are still primarily looking for bullish trades. Let’s consider why this may be the case.

Ingrained to Be Bullish

One of the first things I always ask traders when talking about trades, especially in a bullish market, is whether they have taken any bearish trades. The answer all too often is no. The reason many times is that they are taking an investor’s mentality. Most investors buy stock hoping to see it go higher. Most never short shares hoping to buy them back for less than they were sold, at least for more than a day trade. So many traders have it in their heads that stocks will always go higher, and they bring that same mentality to option strategies as well.

Bullish Market…Usually

Let’s be honest, for the most part the market moves higher, or at least not a whole lot lower, in the long run. Many major indexes have set recent all-time highs over the past couple of years. This also contributes to why a bullish mentality is often present. Unless you have been long growth stock over the past two years or so, many stocks have moved higher if you go back 10 or 20 years. Again, this contributes to the bullish mentality.

Finally

By no means do you have to force bearish trades if you are not comfortable. Just don’t force bullish trades if the market is in a bearish run. Being able to break those bullish thought patterns is a major step toward being able to profit under any market circumstance.

John Kmiecik, Market Taker Mentoring