Opinions are often wrong in the stock market, but it is damn near impossible not to form one. I struggle with it. I love trading and I love the markets. I could talk stocks with friends all day like it is the NBA or the NFL. That is true for any passion people have, but in the market it can cost you money.
I have always been an optimistic person. I see the glass half full. When it comes to the market I try to stay objective on price action. I want to see where money is heading and base the strategy on those facts. I still recognize the bullish bias at times.
Even when I form a personal opinion, I can change my mind in an instant and adjust.
That ability has kept me alive in the market for over a decade.
The market is under significant pressure
Wednesday saw the Nasdaq down 1.9%. It was an absolute bloodbath for growth stocks. Here is what my watchlist looked like at the time:
I was bulled up in the run-up to this week. When leaders started breaking down, I did not hesitate. I sold down every stock I did not have a significant profit cushion in. I went from 102% invested to 30% invested in a matter of minutes.
I posted on Substack my thesis on a precedent for the market to follow 1999 price action not too long ago. Imagine how foolish I felt having to reverse my position a week or two later.
Still. I did not hesitate.
Survive long enough to get lucky
I heard Jason Shapiro say that recently. It is true. When we have a powerful breadth thrust in the market, like we did in April, everyone makes money. You will see it all over X and social media. Even my wife (who has been trading for a little over a year) was catching monster moves.
As they say: “Everyone is a genius in a bull market.”
That is not a bad thing. When the market is in a strong uptrend, we catch monsters. It will happen. But we cannot force it. We have to wait for the deck to get hot. The true alpha is made in the sitting out.
Horror stories are everywhere
There was a picture circulating on social media earlier this week of someone who ran their account from $1M to $27M and then gave it all back, and then some:
All of the self-proclaimed “gurus” on X commenced dunking on the guy. Some even questioned why he did not take profits earlier. They fail to put themselves in the position of the trader.
You know how you get $1M to $27M? By growing it to $2M. Then $5M. Then $10M and so on. Guess how you get to $50M? Same deal. I understand what he was probably thinking.
Greed, fear and hope drive all behavior in the market. To keep your own emotions in check, you have to build a process to save yourself…from yourself.
Rules is how you win
You must have buy rules and sell rules that align with your personality and timeframe. No one else’s rules will work. They have to be yours.
They should be formulated through your trading data (AI makes this really easy these days). You need to see what you do well in trading and what you need help with. Build the rules so that by following them, you avoid your weak points and lean into your strong ones.
I excel at scaling out of winning positions and adhering to sell rules. I am weak on overtrading. I built a rule to trigger a cooling period if I keep losing money on the same setup. That rule I owe to Bloom Energy this year.
You should always be adjusting these rules and iterating the process for improvement. I tape my rules to my computer screen and read them daily. I make it a point to do that before I turn on the screen.
We all struggle
Everyone struggles in trading. They may not choose to show you the truth, but it happens. Social media will give you the impression that no one struggles. As with many things on social media, it is bullshit.
It reminds me of the scene in Wolf of Wall Street where McConaughey spits some game: “I don’t care if you’re Warren Buffett or Jimmy Buffett, no one knows what the market will do tomorrow.”
It is true. All we can do is interpret what is in front of us and make the decisions that give us the best probability of making money. I will definitely continue to do that on this platform.
Trade safe my people!