Chris’ note: This year’s rally in stocks is headed for a hard stop. Buy-and-hold investors could lose the gains they’ve made this year… and then some.
That’s the warning from master trader Jeff Clark.
He’s the trader who predicted the 2008 financial crisis months in advance… along with the stock market crashes of 2020 and 2022.
Now, he’s out with another big call. He’s discovered a pattern that has predicted every summer crash going back to 1951.
And it’s flashing red again.
That’s why tonight, at 8 p.m. ET, he’s going live with exactly what this pattern is… and how you can profit. So, follow this link to sign up.
And in case you think Jeff is some brash trader aiming to shoot the lights on every trade, make sure to read his insight on risk management below. As you’ll see, Jeff is actually a very conservative guy when it comes to taking profits on his trades.
A few years ago, I recommended my subscribers buy a call option.
Think of a call option as a bullish “side bet” on a stock. You profit when the stock price goes up.
This call option was on one of the world’s largest investment managers, Invesco (IVZ).
In a little more than a month, my subscribers had the chance to make 125%.
Pretty good.
But after I closed the trade, IVZ kept climbing. Over the next few weeks, it rose another 10%.
Some of my readers weren’t happy about it. They wrote in and asked me, “Why did we close that trade? We could’ve made even more if we held on.”
It’s a natural question.
And the answer is critical if you want to make money over time as a trader.
So today, I’ll share with you what I told them…
Let’s Make a Deal
Imagine you’re a contestant on the game show Let’s Make a Deal in its heyday.
Host Monty Hall yanks you out of the audience. He flaps $2,000 in cash in your face and says, “This is your money. You can take it and keep it. Or you can trade it for what’s behind the curtain.”
There’s a 50% chance that what’s behind the curtain is an all-expenses-paid trip, say to Mazatlán, Mexico. It’s worth $5,000. There’s also a 50% chance what’s behind the curtain is virtually worthless.
What do you do?
One way to look at it is that you came with nothing. If you take what’s behind the curtain, the worst case is you’ll leave with nothing, too.
But there’s a 50% chance you’ll increase the value of your prize by 150% (the $5,000 vacation over the $2,000 cash prize). So you pick what’s behind the curtain.
But if it’s me in that situation, I’m taking the cash.
I’m thinking, “I came here with nothing. If I take the $2,000 in cash, there’s a 100% chance I’ll leave here better off. But there’s only a 50% chance I’ll leave here happy if I take what’s behind the curtain. Either way, my life won’t change dramatically. So I’ll take the $2,000 and be happy no matter what.”
If I win a trip valued at $5,000, I’ll be ecstatic. But I’ll feel like an idiot if I give up the $2,000 and get the booby prize.
So, I’ll pass on ecstatic. And I’ll take happy.
Apply This to Stocks
Every time I close a trade I’ve recommended, a little voice in the back of my head asks, “What happens if it moves even higher?”
This is like Monty Hall asking if you want to keep the $2,000 in cash… or forgo it for what’s behind the curtain.
If I close the trade right now, I know I’ll be happy. If I try to squeeze out more gains, I could get happier. But I could also feel like an idiot for being greedy.
I choose to err on the side of happiness.
It has to do with a painful lesson I learned when I was just starting out as a trader…
Rookie Blunder
I was 19 when I made my first options trade.
I had a gut feeling the stock market was heading higher. So I bought some call options.
A few hours later, I sold them for a 200% gain.
Flushed with success, I made 17 more trades, each one a winner. This allowed me to turn a $5,000 grubstake into $50,000 in just six weeks.
Going 17 for 17 was a remarkable feat for a rookie. I thought I was a genius. So I decided to get serious.
“No more tiny trades,” I told myself. I was too good for the small stuff. I’d figured out a way to beat the market!
So, I took the $50,000 in my account, added it to my $25,000 in savings, and put it into a handful of options trades.
You can probably guess what happened next…
The stock market has a habit of humbling folks who think they’ve figured it out. For me, the humbling started right away.
One by one, each position blew up on me. It was too painful to watch. I kept the TV off and avoided reading the newspaper for fear I’d see something bad about the stock market and my positions.
When I finally got up enough courage to check my account, I learned that all the gains I had built up over the previous six weeks were gone.
“Just sell everything,” I sobbed through the phone to my broker.
Make Up to $1,200 Every Day of the Week
That was an expensive lesson.
But it’s one every trader learns at some point.
If you want to consistently grow your wealth over years, choose happy over ecstatic.
If a trip to Mazatlán is behind the curtain, you’ll feel disappointed.
But you’re going home with more money than you had to begin with. And you’ll have another shot at big gains next time.
Take the money when it’s flashing in front of you.
It’s why I’m so excited about today’s event.
I’ll be lifting the lid on a strategy that allows you to make up to $1,200 every single day of the week – no matter what’s happening in the market.
I’ll also share my favorite ticker to trade to take advantage of this opportunity. Go here to automatically save your seat.
Regards,
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Jeff Clark
Editor, Market Minute