If you’re feeling the need to jump into the pool right now, take a deep breath and walk around the block a few times. Step back and get a reality check. FOMO can cut you off at the knees.
We are in a BUBBLE. It may not seem so when you turn on the financial news. But every bubble in history has looked the same at the top. Excessive exhuberance and a rush to jump into the market by the least experienced investors. All eyes and ears are on the FED. Probably the worse source of useful information.
The talk now is rate cuts. I guess the FED doesn’t see the easy money rate cuts before as the instrument that has lead to this asset bubble. But it did and if they do it again, all hell is going to break loose.
Sorry. But my pre-disposal to “too many negatives” is keeping my investment account mostly in cash. I have a few trades on right now in both defined and undefined risk strategies of very short duration. I diversify via strategy and duration and manage all my trades at 21 days to expiration.
If you haven’t seen it yet, here is a copy of the management chart I use for all my trades. It was created by Anton Kulikov and Mike Hart at tastytrade and it has not failed me yet. Since all of my trades involve selling premium, this charts serves me very well. If you are a long only trader, then your max loss is the premium you paid to enter the position. So you knew the risk when you went in. For me I need to take appropriate action if prices gyrate and seeing the actions available to me is a big help.
This is the time to be prudent. Follow your plan and only risk what you can afford to loose.
Your friends may be trying to tell you its time to go all in. And it’s your call. And if you do, be sure to have an exit strategy. Take profits, tighten your stops, hedge in what ever way you feel is appropriate.
One of my management actions is to close my positioins, when I have 50% of max profit. It seems counter intuitive to do it this way. But I don’t chase winners. I take a nice piece and bank the cash. I have found it to be an excellent management strategy especially in volatile markets. Besides, it helps me sleep soundly at night.
If you’re a football fan, enjoy the Super Bowl!! And be sure to keep your eye on the ball…the football and the market ball, of course
Have a good trading week and be sure to download the management chart.
Take care and Happy Trading