Hey Trader,
There’s no doubt that the events of this past week have probably shaken all of us, at least to some degree …
Many of you are probably wondering what to do …
And how to protect yourself.
So today let’s talk a little bit about how you should be trading right now …
And some steps you need to take to “bear proof” your portfolio.
First things first …
Hodl.
Reddit jokes aside, right now is not the time to sell investments that have made you a lot of money.
It’s also definitely not time to sell investments like index funds …
Yes, the market is down.
Yes, it is likely going to go down further.
But … it’s also going to go back up.
So unless you’re on a super-duper short timeline …
Hold your good investments.
Remember, you don’t lock in losses until you sell.
Not to mention when you sell and go to cash right now, all you’re doing is subjecting your wealth to the historic levels of inflation that we’re experiencing right now.
So yes, it can be nerve wracking to watch your nest egg take a hit …
But hold on to the stocks that have done well for you, and that there is a reason to believe they’ll likely do well again.
My second piece of advice for “bear proofing” your trading right now is …
Focus on risk, and be strict about your money management right now.
A “bear market” doesn’t have to be bad.
It’s just an indicator, and it means you need to switch up your trading styles from how you’ve been trading for the past … ten years or so.
That being said, it is NOT an indicator you want to ignore.
The “easy wins” that have been rather plentiful up until now are going to dry up rapidly.
So seeing a “cheap” trade to YOLO (You Only Live Once) on is a bad idea.
Decide in advance – like, right now – how much of your portfolio you’re willing to risk on a single trade, or a single stock, or even a single crypto.
If you wait until you’re in the moment to decide, you’re likely to make emotionally-fueled bad decisions.
In general, looking at your trading portfolio (not the entirety of your wealth as a whole!), you only want to spend 5% or so on a single trade. Maybe a little more if its a spread (which we’ll talk about in a second).
So I don’t care if Apple Inc (Ticker: AAPL) calls are cheap as heck right now … do not spend 50% of your portfolio gambling on them!
Speaking of, options are NOT cheap right now.
Market volatility is high, and that is carrying through into options pricing.
Know that if you are buying straight calls and puts right now, you are probably paying a LOT compared to what you would have paid say, two and a half years ago.
Which brings me to my next point …
If you don’t already, I strongly urge you to consider trading spreads.
We’ve talked a lot about spreads over the last few weeks, so hopefully by now you know that spreads are an EXCELLENT way to control your risk …
And they can also help you lower the cost of your trade, like this Big Money move we looked at earlier this week.
I know some of you are reading this and thinking “oh no, spreads aren’t for me! They’re too complicated, and too much work!”
You’re wrong.
Look, it might take you a whole minute to look at a spread and “get” what’s happening.
But in reality, spreads aren’t any more complicated than placing a single options trade. You’re just doing several at once.
However, brokers and their ilk have perpetuated this MYTH that spreads are sooo difficult, and should only be used by advanced traders.
In reality, your broker doesn’t make as much money when you make a spread trade. Plus, they have to do a little bit more work to set it up.
Boohoo, right?
Spreads can help you strictly control your risk, which actually means LESS work for you, because you aren’t babysitting your trades all day, or getting stopped out by a rogue stop-loss trigger, or whatever you do to make sure your trades don’t get too out of hand.
There is a reason I debuted my personal hedge fund spread trading strategy this week …
It’s because right now, retail traders like you and I NEED to be using these trades.
Trading spreads allows us to continue to chase profits while protecting our portfolio.
And in a volatile, unpredictable market, if you want to trade (which we do, because we don’t want to NOT profit), you need to find ways to control your risk.
Plus, some spreads let you profit in either direction … which is a win-win.
Look, I’ve kept this spread strategy to myself for, oh, 20 years?
I’m not pulling it out of a hat now for no reason.
Looking at trades besides straight calls and puts is going to be the MOST BENEFICIAL way for you to trade right now …
So if you don’t already, start getting comfortable with spreads.
And if you’d like a little help …
Your Only Option,
Mark Sebastian