The buy and hold mentality is on its deathbed in 2009 after getting critically injured during last year's market crash. And why not, considering that the S&P 500 is trading at the same level it posted back in August 1997? Unfortunately, its demise will be protracted because the money management community still depends on this outdated investment style.

Image placeholder title

It doesn't help that baby boomers, the biggest disciples of this strategy, are now almost 12 years older and a lot closer to retirement age. With the average long-term portfolio losing over 35% in 2008, the wealth effect has now shifted into reverse at the worst possible time, just as their earning power is starting to diminish.

As a result, the robotic investment style that depends on owning good companies at fair prices is no longer a viable option for the American public. In its place, we are likely to suffer through several decades of disillusionment and distrust, at least until our children have adequate resources to risk their wealth on stock ownership once again.

This is an especially dangerous time for survivors of last year's debacle. Denial is alive and well this winter, with the misguided assumption that we're in a standard recession that will give way to renewed growth in 2010. More accurately, we're stuck in a deflationary spiral that's likely to last longer and be far more painful than a simple economic downturn.

But Wall Street and thousands of narrow-minded money managers scattered around the globe can't tell you the truth because their well-heeled livelihoods are on the line. In fact, they have just a year or two to win back your trust or they'll be hitting the unemployment lines like so many regular folks these days.

Have you seen the new wave of discount broker ads that are feeding on this distrust? Basically, they're saying you're better off handling your own money because the professionals you entrusted it to mucked up badly and lost it. It's a powerful argument, but it will take more than a colorful trading terminal to survive this tortuous environment.

Retail traders have their own set of critical issues to worry about these days. Simply stated, nearly all of them are losing money in this vicious market. The reason for this catastrophe is simple: The vast majority of at-home players are trend followers piling in the same stocks as everyone else. You can't do that in 2009 and expect to prosper.

The surge of randomness in the daily tape, driven by program algorithms, makes self-directed accounts even more risky for new arrivals from the world of buy and hold. These robots move much faster than our capacity to make informed decisions, feeding off multiple cross-markets that are easily manipulated by small volume.

We small fry watch stocks shoot higher and lower intraday, with no volume and for no reason, responding to hidden forces on a tilted playing field. Our common reaction is to throw money at these violent swings, hoping to catch some phantom wave. Instead, the market "sees us coming," time and time again, and picks our pockets with great efficiency.

So is there any trading strategy that really works in this barren landscape? Yes, but the windows of opportunity are relatively narrow and require a highly disciplined approach to risk-taking. It starts with a willingness to sit on your hands for three out of five trading days each week, waiting for the market to set up and come to you.

Here are two quick trades I made on

Texas Roadhouse

(TXRH) - Get Report

in the last two weeks. You'll notice that one lost money while the other made money. The stock rallied into 200-day moving average resistance and dropped into an ascending triangle pattern in early January after selling off to an all-time low in November.

I bought the small rally on Feb. 9, when the price nosed up to a four-week high and looked ready to break out. It was a standard strategy that probably would have worked well during the last bull market, but it's a loser's game in 2009 to buy a strong close with the expectation of more strength in the next session.

The stock gapped down the next day, right on schedule, and I stopped out. After licking my wounds, I sat on my hands and watched price drop into triangle support. It then poked lower and took out the stops placed under the trendline. It's almost inevitable in this bear market for technically-driven stops to get triggered because daytraders know exactly where they are.

The next entry signal came in the first few minutes of the following session, when price sold off to triangle support once again. I opened a large-sized position and then sold the rally into the same gap that triggered my loss earlier in the week. Sure, it wasn't a home run, but that's a major point here: It's crazy to swing for the fences right now.

There are other lessons to be learned from these examples. First, I lost money taking the standard breakout trade over triangle resistance. This was a basic trend-following strategy that just doesn't work well these days, whether you're going long or short. Second, it was vitally important for me to do nothing while the stock pulled back and looked for support.

Finally, consider how I waited until other traders lost money, reacting to a false breakdown, before my entry signals went off. This is a standard survival theme in this bear market, if you haven't noticed. In a nutshell, failures in one direction are required for the ticker tape to complete a price swing and set out in the opposite direction.

That single nugget of market wisdom can save you a ton of money in this bear market and get your accounts, long- and short-term, moving in the right direction once again.

Alan Farley provides daily stock picks and commentary with his "Daily Swing Trade" newsletter.

Know What You Own: Farley mentions Texas Roadhouse; other restaurant companies that may interest investors include McDonald's (MCD) - Get Report, Yum! Brands (YUM) - Get Report, Darden Restaurants (DRI) - Get Report, Burger King Holdings (BKC) , Wendy's/Arby's Group (WEN) - Get Report and Chipotle Mexican Grill (CMG) - Get Report. For more on the value of knowing what you own, visit TheStreet.com's Investing A-to-Z section.

At the time of publication, Farley had no positions in the stocks mentioned, although holdings can change at any time.

Farley is also the author of

The Daily Swing Trade

, a premium product that outlines his charts and analysis. Farley has also been featured in

Barron's

,

SmartMoney

,

Tech Week

,

Active Trader

,

MoneyCentral

,

Technical Investor

,

Bridge Trader

and

Online Investor

. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks.

Farley appreciates your feedback;

click here

to send him an email.

Also,

click here to sign up for Farley's premium subscription product, The Daily Swing Trade, brought to you exclusively by TheStreet.com.

TheStreet.com has a revenue-sharing relationship with Trader's Library under which it receives a portion of the revenue from purchases by customers directed there from TheStreet.com.