There is an important tool in my toolbox that helps me successfully navigate capital markets and that is to buy weakness in uptrends. When in a bull market, it is a series of higher highs and higher lows. In addition to buying strength (only buying breakouts) is to step up and buy weakness in strong uptrends. It is important to keep in mind that eventually all bull markets end. However, until they do, buying weakness in uptrends can offer the astute trader tremendous risk-adjusted returns over the long term.
3 ways to Buy Weakness In Uptrends:
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Listen to the Market
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Let Patterns Emerge
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Begin buying (and average up) as the market bounces off a near-term low
Will I buy the exact bottom? No. But that is not my goal. My goal is to capture the bulk of the move, not pick an exact top or bottom. Why? Because, over time I know that I can consistently capture large moves in the market without having to pick the exact top or bottom. Additionally, I have yet to find someone who can consistently, and accurately, pick exact tops or bottoms of every move. The more evidence that emerges to support the logic that a near-term low has just developed, the better.
