"Become more humble as the market goes your way." -Bernard Baruch
I've often found that a technical analyst's phone tends to ring way more often in a bear market than a bull market. In a bull market, everyone's a genius, right?...
How do we try to minimize the effect of these biases? Discipline. As Ben explains:
Bull markets can force investors to abandon a good process. Signals, guidelines, and policies that were put in place before stocks began their upward climb get pushed to the wayside because it feels dumb to manage risk when things just keep going up.
This is an ideal time to review charts of all of your holdings. Focus on names that are extended. Have they reached a price level at which you should consider taking profits? Update trailing stops. What would need to happen for you to exit at least part of the position? Screen for other names that are at or near good entry points. Do any of these new names appear to be in a better technical configuration than your current holdings?
By focusing on these things now, you'll be prepared for a correction if and when it does occur. And if you've reviewed the charts, you'll be much less likely to fall victim to the common bull market behavioral biases.
Happy Investing, Dave
Disclaimer: This blog is for educational purposes only, and should not be construed as financial advice. Please see the Disclaimer page for full details.