Knowing when to "play" the market aggressively and when to step back and reduce one's exposure by playing more cautiously is the hallmark of a real "Master!"
Many would-be successful traders fail to realize that a large part of their overall profitability is determined by their ability to determine when the environment is favorable and when it is not.
And when it is not, you had better have an alternative approach to the markets or ...
You will be eaten up alive! Plain and simple!
There are only two ways to make money in trading or investing!
One: The stock is moving in a certain direction and you bet it will continue to move in that direction and,
Two: The stock is moving in a certain direction and you bet it will change and move in the opposite direction.
That's it ...
It's all a matter of direction ...
Up or Down!
We do know that it's harder to change directions than go with the flow. So why would you bet a stock is going to change directions? Sure it does happen and it happens often. But unless you know something everyone else doesn't know why bet on it?
You have a fifty fifty chance of picking the correct direction knowing nothing. What gives you the edge is knowing what direction the stock is currently moving in.
Now no stock will move straight up or straight down. They will all change directions for a point or maybe even two or more. So you have to determine which changes are false and which are real changes.
Regardless of the trading you do or the system you use, if you can determine the direction of movement and spot false from real changes you can become rich!
So that means all you have to be able to do is tell the difference between false change of direction and real change of direction ...
If you can do that you have it made!
This is called finding the "True Top" or "True Bottom" of a stock!