What a year 2011 was! It was a year of crazy volatility with stocks plunging then rebounding on several occasions. Fortunes were made, fortunes were lost, buy and holders got their clocks cleaned in some sectors, others did well. Some break outs worked for the trend traders, others failed spectacularly. It was a year custom made for the flexible, savvy short term trader who could take advantage of the constant zigs and zags of the market.
The primary lesson learned in 2011 is that flexibility is the key to success in today’s stock market. Get wedded to the wrong position and you will take a fat loss. It’s much easier to take the loss quickly and move on to something more favorable than to hope, wish and pray for the position to bounce back. Many learned the hard lesson that it may not bounce back before your funds are tapped out or ever. 2011 was a prime illustration of this must know trading axiom.
2011 taught us just how tightly connected the world’s markets are. The euro zone debt crisis directly affected U.S. stock markets on a daily basis. Although, this correlation appears to be slowly decoupling, traders need to be aware of what is happening in Europe. It’s not just for the economic nerds any longer, if you want to succeed as a trader, knowing what is occurring in Europe is critical to your success.
Investors learned that some long term investments, such as real estate, can actually lose value. Years of upward price movements in the real estate market had investors counting on this appreciation for their financial plans. However, 2011, taught many the hard lesson that nothing is for certain when investing. This lessons goes back to the primary lesson of flexibility. Being flexible and maintaining liquidity is the only way to thrive in today’s market.
Taking these lessons into the still unknown future of 2012 should provide the edge you need to succeed!
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