When a ship begins to sink, bow side first, no smart sailor stern side says, Hey, don’t worry, our end of the ship is safe and rising even higher.

Yet in investing, many will argue with a market that is sinking. My stocks are up, they say.

Misunderstanding the market’s condition is the chief reason people lose money in stocks.

How important is the ‘M’ for market in CAN SLIM. compared to the other six factors?

In How to Make Money in Stocks, IBD founder William J. O’Neil writes, You can be right about every one of the factors in the last six chapters, but if you’re wrong about the direction of the general market, and that direction is down, three out of four of your stocks will plummet along with the market averages, and you will certainly lose money.

The flip side is that if you’re wrong about a rising market, you’ll either miss out on gains or lose money by shorting stocks at the worst possible time during a market uptrend.

Many people suffered a huge portfolio dent in 2000, a second huge dent in 2008, and then the twice-burned investors pulled out of the market and missed the uptrend that began in 2009.

Much pain could have been avoided if the investor took the time to learn how to read the market.

Some will ask: Isn’t the market’s condition clear only after the fact, when it’s too late to do anything?

The short answer: No.

IBD’s approach involves a number of items for gauging a market in real time. They are:

• Item 1. Ask yourself how long the trend has been under way. Is it 1) a fresh move, 2) continuing to show strength, 3) moderately weakening, or 4) in a severe sell-off? Looking at the current bull market, most people would argue that we are either in the second or third phase. There’s no need to be more specific than that at this point. Other IBD steps define things more closely.

• Item 2. What does the Market Pulse say? The Pulse, published daily in a box near the Big Picture (today on B5), describes current conditions without any attempt to predict what the next move will be.

• Item 3. How are breakouts faring? In a strong market, stocks that have no business rising will rise. In a weak market, even the strongest stocks will have trouble advancing. In a strong market, many highly rated stocks will break out. In a weakening market, breakouts among top-rated stocks are scarce.