Chris’ note: Stocks are still in a bear market. That’s bad news for investors. But the traders we feature at the Cut actually look forward to bear markets. They can profit even as stocks fall.
And the more volatile stocks are, the more they stand to profit.
But you can build wealth as a trader only if you manage your risk. And nobody does that better than trader Larry Benedict. Between 1990 and 2011, he didn’t have a single losing year.
Below, Larry reveals two simple principles he follows to stay profitable. He also puts a preprogrammed market event on your radar that few outside of Wall Street circles know about.
Larry has made millions trading past events like this for his clients. And in an urgent briefing tomorrow night at 8 p.m. ET, he’ll be lifting the lid on how the upcoming event could deliver some of the biggest gains of your life.
Keep your emotions in check…
You’ll find that advice in every trading book. But it’s easier said than done.
Emotions flow through us no matter what we’re doing – especially when it comes to the markets.
Compare the euphoric high of riding a winner to triple-digit gains… with the crushing low of taking a hit on a losing trade.
For some, the swings between the highs and lows are enough for them to swear off trading forever.
Truth is, it’s almost impossible to take emotions out of trading completely.
So instead of trying to turn yourself into a robot, you need to find a better way to manage those emotions.
I’ll go through some of the ways you can do that in today’s insight. Plus, I’ll put a preprogrammed market event on your radar. It could unleash massive trading profits in a matter of days.
If you’re putting too much money into each trade, your emotions will almost certainly get the best of you
Say you have $10,000 in your trading account, and you decide to go all in on one trade. Then of course you’ll be nervous. There’s a chance you’ll blow up your entire account with just one trade.
Compare that with another trader who has the same account size but risks no more than $300 on any one trade. It will take a string of losses for that trader to lose just a fraction of his account.
That’s why setting clear risk management rules before placing your first trade is key.
You need to know exactly how much capital you’re prepared to risk on any trade – and stick to it.
It’s also important you set realistic trading goals.
Too often, new traders set their sights too high. So they let their emotions – mostly greed – get the best of them and chase every move… hoping for a big winner.
Inevitably, each trade becomes a rollercoaster ride.
Before they know it, they’ve gone through all their funds and are out of the game. And even if they want to start trading again later, those big losses leave emotional scars.
Instead, I’ve learned from decades in the market that you need to do the opposite.
Get into the habit of taking lots of little profits as often as you can. It builds your account size… and makes you a more confident trader. It helps you keep your emotions in check.
For example, aim to make a $200 profit per trade. That way you won’t get as emotional as you would betting your whole account on a single trade.
Soon, all those $200 profits start to add up – giving your account size a real boost.
So when you up your profit target to $300 or $500 per trade, it will be less of a big deal. You’ve already trained yourself into taking profits off the table.
Now you can focus on refining your trading strategy… rather than tying yourself up in knots with each trade.
As we’ve seen this year, it’s impossible not to get emotional as stocks plunge… and the economy hits the skids.
That’s why I work hard to help traders feel emotionally prepared.
It’s also why I try to keep my readers ahead of the curve by flagging market drops ahead of time.
Much of what we hear is hype… But the few times we’ve needed to be wary, I’ve given my readers notice.
For instance, at this start of this year, I warned stocks would drop.
I’ve been trading markets for more than three decades. I knew high inflation would lead to higher interest rates and lower stock prices.
I helped my readers avoid the worst of the pain during the March 2020 crash.
We even managed a triple-digit profit as the indexes tumbled.
And it was the same story when I was running my own hedge fund.
By sticking to the simple principles I outlined above, I had 20 consecutive winning years from 1990 to 2011.
That included the dot-com bust in 2000. It also included the global financial crisis in 2008.
That was the worst year for stocks since the Great Depression. But I made $95 million for my clients. They included the Bank of New York, the Royal Bank of Canada, and the Saudi National Bank.
That got me featured in Jack Schwager’s classic book on the world’s best traders, Hedge Fund Market Wizards. His chapter on me came right after one on the manager of the world’s largest hedge fund, Ray Dalio.
Schwager’s book also featured Beat the Dealer author and math genius, Ed Thorp.
Thorp cranked out average yearly returns of 20% for three decades with seldom a losing month… and is widely seen as one of history’s most successful investors.
And this year, I aim to do what I did in 2008 again – take a crappy year for stocks and turn it into a bumper year of trading gains.
As I’ve been showing my readers, a preprogrammed market event could create even more volatility than we’ve seen so far this year… in a matter of days.
As much as $1 trillion could change hands as it plays out.
But if you keep your emotions in check… this event could deliver some of the biggest gains of your life – if you act quickly.
Wall Street knows what’s coming and is already getting ready for this preprogrammed event… but almost no one else knows what to expect. I want to change that – because the best way to profit from this event is to be ready ahead of time.
That’s why I’m hosting an urgent briefing tomorrow at 8 p.m. ET.
I’ll explain how to get in position right away… and the single ticker we can use to profit in as little as 24 hours. After the rough time many of us have had in the markets this year, this is your best chance to get into the black.
So if you haven’t already, you can sign up to attend – for free – right here.
Regards,
Larry Benedict
Editor, The Opportunistic Trader