Posted May 12, 2021
By Alan Knuckman
How to Keep Cool During Summer Trade
Its difficult to fight our natural human instincts when market volatility ratchets up.
Anxiety over losing hard earned money (and just being plain wrong) increases in the hyper-information media world that blurs the line between manufactured news and disaster.
But you know what I always say, volatility equals opportunity! If you know how to react
Here are five simple tips that can help you keep cool during difficult summer trading sessions:
- Think Long Term All short-term trades should already have a stop-loss exit strategy built in so that panicked buying or selling is not needed. That disciplined risk control plan must be created prior to position entry. Other assets that may be locked in for years and even decades can be evaluated monthly or quarterly to shift allocation if market conditions change.
- Turn Off the TV Financial news channels dramatize events to ensure your continued dedication to their programs. They are in the business of boosting ratings with market infotainment and advertisements. Their goal is to make money for themselvesnot you!
- Take a Walk Get up from your computer and clear your mind with a distraction. A five-minute stroll to get a coffee can prevent reactionary chasing of the market that is rarely profitable. Breaking the focus on your fears does wonders in seeing possible opportunities.
- Remember, Its Only Money Nobody died on the operating table tomorrow is another day. Proper dollar allocation and asset diversification should prevent any catastrophic damage to your portfolio. If any one day can do that much financial damage, then your risk control needs a redo.
- Fade the Crowd Sheeple (sheep-like people) will get sheared! Opinions are often wrong when everyone is on the same side of the trade. Think about every crisis weve faced over the past decade. Things never developed as predicted by doomsayers!
Oftentimes, the best buying opportunities are when you cannot think of any reason for the market to move higher. The risk-to-reward ratio is in your favor after that big break or you can just keep your hands down, stay in cash and wait for another day
Remember, dont let the summer chop chew up your trading account!
Keep it In the Money,
Alan KnuckmanEditor, In-The-Money
Trading Tip of the Day: The Disconnect Between The Market and The Economy
Famed economist Milton Friedman famously noted that the stock market and the economy are two very different things.
This bit of wisdom rings especially true today as we continue to endure the economic impact of the coronavirus, even as we begin to reopen. Plenty of us are ready to move on but the truth is, were not out of the woods yet The economy is certainly feeling the pain still. But the markets? They continue to reach new highs.
This disconnect can be incredibly frustrating for investors, who often find stocks detached from reality. It helps to remember that the stock market is forward-looking. Markets are more likely to react to changes in future expectations than recent employment numbers. Remember this the next time you see a big market rally following bad economic news.
Keeping this in mind could help you predict your next big winner, or avoid a detrimental loss!