Markets that start to make violent moves after a nice and long steady uptrend are among the toughest markets to trade. The increased volatile moves to the downside, combined with strong bounces that shake out your shorts, and mixed signals can make trading during this period a nightmare.
To combat the difficulty of trading these markets, traders should have a systematic approach specific to this type of volatile market.
One of the first steps is to make a list of stocks showing relative strength.
What are relative strength stocks?
Simply put, its stocks that are beating the market.
While the market has been down, these stocks are up.
My test for pocking relative strength stocks is to ask myself "if I just looked at this stock's chart, would I know that the market is tanking?"
If the answer is no, then you put that stock on your relative strength list.
Now that we've made the list, when do you trade it? We'll talk about that for each stock in today's video.
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