Bear markets are psychologically bruising.
After years of building up gains, they evaporate in a matter of months… without warning.
This year has been no different.
The S&P 500 is down over 20% since January.
And if you’re heavily invested in tech stocks, you’ve probably fared even worse.
The Nasdaq – which is packed with large-cap tech stocks – is around 30% below its all-time high last November.
Retirement accounts are a lot smaller than they were this time last year as a result.
And folks who got in during the panic-buying stage at the end of last year are now nursing stinging losses.
That’s why I’m writing to you today… I want you to know it doesn’t have to be this way.
People can lose fortunes during stock market plunges. But as a trader, I know they can make many greater fortunes in the aftermath.
In fact, some of my best trading years were during extreme market crises.
If that sounds absurd, keep reading. By following some simple advice, you can achieve similar results… starting today.
Profiting From Past Crises
Take the “Black Monday” stock market crash.
It happened on October 19, 1987. And it took the Dow down nearly 23% in a single day.
That’s the largest one-day crash in the index’s history.
But during the lead-up to Black Monday, I was able to multiply my money 10 times…
Then, following the dot-com crash in 2000, my trades resulted in a seven-figure windfall for my clients at my former brokerage firm.
(I sold my firm at the end of September 2007, right before the 2008 crash struck. That surely qualifies me for some sort of market-timing award).
Longtime readers know how well I did in the last financial crisis of 2008. If you’d followed my recommendations back then, you could’ve doubled your money – or more – on 18 trades.
How is this possible?
It has to do with three trading habits most everyday investors don’t follow…
-
Good Trading Habit No. 1 – Fight the urge to trade with the crowd.
This is harder than it seems.
When the stock market marches higher each day, it’s uncomfortable to sit on the sidelines waiting for a more profitable entry point.
Seeing the gains, other folks are making each day doesn’t help.
But there’s a big difference between the investor who bought out of FOMO (fear of missing out) right before the S&P 500 peaked in January… and the one who waited for better prices.
The former is praying the stock market will come back to where it was before the crash. The other is happily buying stocks at bargain prices.
-
Good Trading Habit No. 2 – Remember that what goes up must come down.
As soon as it seems a stock market rally will go on forever, that’s about the time you know the party is coming to an end.
Often, the last legs of an overextended rally draw in the least-informed investors… and saddles them with massive losses.
Knowing how to spot these moments is key to finding opportunity in crisis markets.
Sometimes that means sitting on the sidelines as the rally continues. Accepting that is key to being a responsible trader.
-
Good Trading Habit No. 3 – The best trades are the toughest to make.
I sat out most of the stock market’s rally late last year.
Then, when the market crashed, I was ready to step in and start buying.
It was uncomfortable. Nobody knew how far the market would fall.
I had to accept that I might even lose money even on the lower entry points I bought at. But I knew that it made more sense to buy at those levels than late last year.
For example, on January 24, I made a call that the S&P 500 was setting up for a rally.
It was trading at about 4,100 points at the time. And most people didn’t believe it would go higher.
But by February 2, the S&P 500 had rallied to a high of 4,589 points. That’s a 12% gain.
Had you followed my chart analysis and trade recommendations, you would have bought when everyone else was selling. But you also would have profited.
For example, just one day after making that call, my subscribers closed out of a long trade for a 90% gain. And the next day, they closed another long trade for a 133% gain.
So, it pays to go against the herd.
Golden Thread
There’s a golden thread that ties these habits together…
To be a successful crisis trader, you must learn to control your emotions.
We humans are emotional, irrational beings. Greed and fear pull us one way or another.
Learning to recognize and control these emotions – and counteract them – is essential.
It’s what leads to the kind of gains I mentioned above.
Of course, I give a lot more specific guidance to my subscribers about how to trade in a crisis scenario.
And I’ve identified a massive market-moving event that’s guaranteed to happen just days from now…
Dozens of popular stocks could freefall overnight. In fact, $4 trillion is at stake.
That’s why Wednesday, November 2, at 8 p.m. ET, I’m making an urgent broadcast.
Something in the market is about to “snap.” Prepare now – and watch my broadcast – or risk getting slaughtered. You can reserve your seat right here.
Best regards and good trading,
|
Jeff Clark
Editor, Market Minute