| While many traders will classify the market drop of | | | | pullback is in progress, it is wise to wait for the |
| over 200 points on the Dow Jones Industrial Average | | | | market to stabilise. Statistics have shown that stocks |
| in March 2007 as a pullback and not a crash, all | | | | fall around 3 times faster than they have taken to |
| traders will agree that it was a market correction | | | | move up in price. Any corrective move in stocks will |
| that had to come to dilute the long term excesses | | | | bring fear into the eyes of traders who have not |
| of bullishness and euphoria over the years of strong | | | | been exposed to deep market corrections before. |
| uptrend and shallow pullbacks. | | | | But when the stock prices have stabilised, then the |
| Recently, I was in the kitchen, watching my wife as | | | | stock selection process is important. And that is |
| she was cooking an exotic dish of stew pork in | | | | when the lesson of selecting cutting knives from my |
| aromatic spices and garlic. With the aromatic scent in | | | | beautiful wife comes into play. |
| the air,I could not help but paid attention as she | | | | Like the knives, it is more profitable for you to select |
| proceeded to tell me some facts about the nicely cut | | | | a few stocks that are of good quality that has |
| chunks of meat in the pot...and about knives. | | | | stumbled in price, but which have good growth |
| "I would rather have two good and sharp knives than | | | | potential, and good management. These good stocks |
| the entire set of knives that were of lower quality | | | | now are selling at attractive Price-Earning ratios |
| that we got as a present from your friend," my | | | | brought low because of the price pullback and will be |
| beautiful wife said. "Two good knives that are sharp | | | | good stocks with lower risk. |
| and of good quality will not go blunt easily, and can | | | | "I would rather have two good and sharp knives than |
| cut easily into the meat for a very long time without | | | | the entire set of knives that were of lower quality...", |
| sharpening than the entire battery of knives that are | | | | my wife beautiful had said. |
| of low quality". | | | | How true it is in selecting the stocks to trade during |
| As a professional stock trader and a trading coach, I | | | | a bearish period. |
| cannot but marvel at the aptness of what my | | | | Spend time researching your stocks. Seek out the |
| beautiful wife had said about picking knives, and how | | | | good quality stocks, and buy into those that have |
| they would relate to picking stocks after a market | | | | the better quality as they will rebound fast in price |
| crash. Indeed, many traders are unable to trade | | | | than buying a host of cheap, penny stocks that have |
| during bearish times as they have not been exposed | | | | been dumped by discerning traders during the bearish |
| to bearish periods before, having only begun to trade | | | | market, with little prospect of recovering fast. |
| during the past few years when the stock market | | | | In bearish times, there is always a flight back to |
| had been bullish. | | | | quality stocks and like knives, you must select those |
| So how would you trade during a bearish period? | | | | of good quality. |
| When the stock market has crashed, and a strong | | | | |