The S&P 500 just broke out past a major line of resistance…

Over the last three weeks, it’s rocketed past the index’s 50-day moving average (the green line, below).

On Friday, it closed above its 200-day moving average (the red line, below).

It’s the first time the index has closed above the 200-day moving average since the market’s 11% August wipeout.

[The 200-day moving average often acts as a major line of support (or in this case, resistance) for stock prices.]


That’s a bullish sign. But keep in mind, a bevy of disruptive events lie in the near future: the U.S. debt ceiling debate… a new federal budget battle… the ongoing conflict in Syria and the Middle East… and more “jawboning” from the Federal Reserve over when it’ll start hiking interest rates.

More turbulence lies ahead. To ensure your portfolio’s ready for it, read the piece below from PBRG editor and former hedge fund manager Teeka Tiwari. He explains the No. 1 mistake most traders make… and how you can prevent your own bottom line from suffering from it…

Teeka Tiwari

From Teeka Tiwari, editor, Jump Point Trader: The most important thing for us to do as traders and investors is to manage our risk. Not every single stock is going to be a winner. That’s the nature of trading.

To take advantage of the highs, we have to stay alive during the down periods. We do that by using rational position sizing.

Position sizing helps control our risk. That’s because it’s driven by the idea of not how much we think we can make, but by the maximum amount we’re prepared to lose.

You must pick a definitive dollar amount you’re prepared to lose should your stock get stopped out. (If you have a smaller account, I suggest $500. If you have a larger account, it should be $1,000. If you have a much larger account, it should be $2,000.)

But most investors do the opposite. They see a “juicy” trade setup, and their eyes start seeing dollar signs. Greed sweeps them away… and they enter trades without any exit strategy.

They fail to grasp this fundamental investment insight:

If you can control your losses, then the gains will take care of themselves.

Losses are unavoidable in trading and investing. The only thing we can control is how much we lose when a stock gets stopped out. This is where rational position sizing comes into play.

You can review the “nuts and bolts” of position sizing—along with the other two legs of our risk-management protocol, the Palm Beach Three-Legged Stool of Safety—right here.

Reeves’ Note: Regular Daily readers are familiar with Teeka’s incredible “rags-to-riches-to-rags-to-riches” story. He was the youngest vice president in investment bank Shearson Lehman’s history. And he was one of the most in-demand hedge fund managers on Wall Street.

But readers may not know Teeka has an additional “secret weapon” in his investment arsenal: his chief research analyst, free market economist Dr. Richard Robinson. Richard may be one of the few investors out there with a story to rival Teeka’s…

Over the coming weeks, we’ll pull back the curtain on Richard and show how he’s helping PBRG subscribers “behind the scenes.” Stay tuned…