I have previously written about a number of trading styles, all with catchy names like The Long-Term Day Trader, The Hit-and-Run Trader and The After-Hours Trader. Now that we have all gotten a taste of a bear market, I'm convinced that the traders who have profited in the last year are multidimensional. That is, they are flexible enough to try out a variety of trading strategies depending on the current market environment. Although you can make a living specializing in only one or two trading strategies, I believe the more strategies you master, the more profitable you'll eventually become. The mistake many investors and traders made was to keep using the same old strategies that worked in the past, even though the market environment changed. Two years ago, it didn't take a lot of brains to make money. Since that time, however, it has become a lot more challenging to make consistent profits, and those who have learned new tactics and techniques are more prepared for the future. If you are a multidimensional trader, you are not only using a variety of strategies, but are also open to other investments, like mutual funds, cash, real estate, options, and bonds.

One common mistake that many people make is to trade too many stocks. I think the traders at Pristine have proven that you can do very well by focusing on only a handful of stocks. It takes time to find stocks that you are comfortable with. It sometimes takes a long time to find stocks that you understand and are comfortable trading, but once you do, you will be amazed at how clear things become. You will feel in synch with the market. When you feel out of touch and confused about the direction of the market or your stocks, then simply don't trade that day. Once you find your niche, wherever it might lead, make sure you stick with it and do not get distracted by other stocks or strategies. Stick with what works best for you.

A lot of readers have asked me about sector trading, and although I've written about it before, I'd like to write more about this strategy. Simply put, instead of trading random stocks that you pick each day, you wait until the market opens and play stocks that are in the strongest or weakest sectors. As you know by watching the market, money is always flowing into and out of stock sectors, so on any given day, one or two sectors will be stronger than the others. One mistake that many investors and traders made in the past, including many pros, was to continue to stick with the technology sector even as it continued to fall apart in the last year. And when this sector bottomed out the week of September 17th, many were so disgusted with technology stocks that they missed out on the subsequent run up. Obviously, in hindsight we're all geniuses, but if you think in terms of strong and weak sectors rather than stocks, you might find that trading doesn't have to be hard.

So, you wait until 10:00 a.m. EST or so until you find which sectors are strongest or weakest. In your trading software, you can create a list of stocks in each sector and refer to them during the trading day to determine which sectors are strong or weak. By overlaying a chart of the Dow, Nasdaq, or S&P 500, you can quickly determine which stocks have relative strength. In other words, if you see that a Nasdaq stock is trending higher than the Nasdaq, it means this stock is strong relative to the index. In fact, if the Nasdaq starts to sell off, and your stock keeps rising, it would be a very positive sign. At this point, you should look at other stocks in the sector that are showing relative strength. You could even consider buying a basket of stocks, which will reduce some of your risk and allow you to achieve a higher return if the sector remains strong. It's a lot safer to trade a basket of stocks in one sector than only one stock.

I could write more about trading sectors, but hopefully you are getting the idea. Although I talked about sector trading in my second book, The Long-Term Day Trader, I have been unable to find one book on the subject. If any of you are thinking of writing a book, this is a subject that a lot of traders are interested in. In fact, if you are really a multidimensional trader, (don't you like how I pulled this all together?), you should consider sector trading along with other strategies that have worked for you in the past. Good luck with your trading, and don't be surprised by anything the market does.

By Michael Sincere of www.pristine.com  All rights acknowledged

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