Anticipating the markets isn’t easy. If it was, anyone could make millions day-trading. But you don’t have to be a genius forecaster to be a successful trader, says Warrior Trading’s Ross Cameron. You just need to be aware, be disciplined, and have a plan.
Many market pundits are anticipating a bull market in the near future. In early June 2023, the S&P 500 was up almost 20% from bear market lows in October 2022. But with rising interest rates, nothing is certain in these uncertain times. Either way, day traders need to be prepared, come what may, and have a trading strategy and attitude to match, says Ross Cameron.
“One of the things that is good news is that when the market slows down as a result of an increase in interest rates, which we’re certainly seeing, at least on the stock market side of things, that when we go into a period of holding and declining, the market typically rebounds quickly. So it wouldn’t take all that much for the market to be back to all-time highs at this point,” says Cameron. “If we go back to highs, all of a sudden you’ve got that enthusiasm, that participation back. People are excited. They’re like, let’s get back to this.”
Cameron thinks that if we get back into a bull market, then there’s no doubt that day traders are going to have some great opportunities ahead.
“But if we stay in a bear market, then it’s going to be a continued time where traders will be forced into a state of submission, and they will have to be disciplined. And if traders are not able to be disciplined, the market will continue to punish overtrading, taking unnecessary risk,” says Cameron.
Warrior Trading Expert Says Bear Markets Are a Time for Preserving Capital
Cameron says that rather than frantically search for gems that will skyrocket in a downward market, bear markets are a good time to preserve capital, finding small gains that will keep you afloat rather than risky moves that could deplete your war chest.
Trading in such a manner also builds the skills traders need to succeed.
“It’s a time for gathering and gaining experience so that you’re well positioned for when things pick back up,” advises Warrior Trading’s Ross Cameron.
The Warrior Trading boss says a few months ago, the market was in a “little bit of a trough” — in a low point. And while the markets have risen since then, it’s still entirely possible the market could hit another trough.
But such a forecast isn’t a reason for day traders to despair.
“Getting through a low point sometimes means hunkering down, battening down the hatches and staying disciplined — staying safe and preserving capital and sitting a little more on the sidelines,” says Cameron, adding that he personally does well in bear markets and times of volatility. “But I do well when that volatility is on specific sectors going up. Last year it was oil going up, even though we were in a bear market. I did very well so far this year with banking going down.”
Right now, he’s waiting for a sector to emerge that’s going to have strength this year.
“I don’t know yet what it’ll be. I didn’t know oil was going to happen. I didn’t know we were going to see all the enthusiasm with Chinese [initial public offerings] last summer. But these things come. And I’m trying to really encourage people to use this as a time to gain experience and get ready,” Cameron says.
But unfortunately in bear markets or times of volatility, Cameron says a lot of people often just totally sit on the sidelines, “not even participating until it’s hot. And then they’re going to come back in but without the experience to fully capitalize on.”
And that’s a lost opportunity, he says.
Focus on Technicals, Not Fundamentals
Day traders are looking at short time frames: stocks that will move up or down in a few hours, rather than looking for something to hang on to for a period of years. But in times of volatility, this can be difficult.
Often day traders will look at the fundamentals of a stock — the underlying company’s financial performance. But this can be a mistake, says Cameron. Instead, they should look at the technicals — the chart movements of price and volume of the stock.
“It can be very confusing as a trader focusing on very short durations, short time frames, to try to understand fundamental analysis. Because sometimes you’ll have news that seemingly is good, but the stock will go down. To really understand that probably requires understanding the company better and to understand the context that news is in,” says Warrior Trading’s Ross Cameron. “For instance, maybe that news is putting a damper on a previous estimate or a previous expectation that investors had. So, while it might on the surface seem good, the market responds negatively.”
Cameron says he doesn’t spend a lot of time trying to analyze the fundamentals of a company.
“My average trades are five minutes long. They’re very short. I am capitalizing on short-term periods of volatility,” Cameron says. “Those can be the result of breaking news. But what I focus on is the price action” — or how a stock’s price moves. He continues, “Dissecting fundamentals feels like trying to read a horoscope. Too much of a guess. And ultimately, the price action is almost reading the news for me because the price action is either positive and reacting well or the price action is negative and reacting poorly. And that tells me what the news is, or whether it’s good or bad.”
So, while Warrior Trading’s Cameron might expect a bull market around the corner, he nonetheless advises traders to take each day at a time.
“Trade the market you’re in,” he says. “Not the market you wish you were in.”
Disclaimer: The information provided in this article is for educational and informational purposes only and should not be construed as financial advice. The content is not intended to provide specific financial, investment, tax, legal, or accounting advice. You should consult with a professional financial advisor to determine what may be best for your individual needs. Trading in financial markets involves risk and is not suitable for all investors. Past performance is not indicative of future results.
