2 Things you need to do if your trading is troubling you

Are you worried about a market crash or a big correction wiping you out? A lot of traders do worry about that and it keeps you up at night. And I’ve had periods in the past where it’s kept me up at night. Right now, though, I’m in one of the state parks in California where the redwoods grow, the giant redwoods. And I’m standing next to this humongous tree that’s fallen down. And I don’t know, it must be, it’s a couple of hundred feet tall. Well, it was. Now it’s a couple of hundred feet long. And it really serves as a reminder of past markets that have been successful and then failed, like bull runs that had humongous gains and profits, only to then fall and turn into a bear market.

Now, what’s the lesson from this? Well, what’s interesting is out of these fallen trees new life grows, and new opportunities, and so these create this whole ecosystem. You see there’s all sorts of plant life and animal life that lives on these fallen trees, and they’re protected. And you look closely, there’s amazing amount of new life that springs out of these fallen giants. And the same thing happens in a bull market. The bull market grows and you make massive profits, and then at the end of the bull market there’s a correction or a bear market, and out of that bear market new life comes.

As a trader, we have to be prepared to ride the whole bull market, then be prepared for the bear market, because we know it’s coming. Don’t be afraid of it. Just prepare for it. Create trading systems and approaches that work on the way up and on the way down. And then after the correction, or if you don’t want to trade short, then get out of the market, go to cash, and be prepared for the new life that comes afterwards. Because after a bear market always comes another bull market. It’s just a cycle we need to get used to. It’s not a cycle we should be scared of, or that should keep us up at night.

If that potential of a bear market, of a massive correction, of a stock market crash, if that potential is keeping you up at night, then something is wrong with your trading plan. Something is wrong with your system. Chances are you’re being too aggressive, using too much leverage, or you haven’t fully tested your trading system. Because a good trading system that’s fully tested will make money all the way up and then will get you out, take you to cash, and be in safety on the way down in the bear market, and then get you back in at the bottom and ride your way up. And then if you have a system to trade short in the bear market, it’ll keep you out, all the way up, and then ride all the way down, or at least most of the way down, so that you’re prepared for the next bull market.

So if you don’t have that feeling of confidence that the cycles are okay, then chances are you either need to develop and backtest a trading system or reduce your risk and leverage. They’re one of the two things, actions that you need to take if you’re not confident, if you get kept up at night worrying about the market. And if you need help with either of those two things, you need my Trading System Confidence cheat sheet. So click the link below and download the Trading System Confidence cheat sheet, because that will show you how to test your system to make sure you understand how it makes money on the way up, what sort of drawdown it will suffer as the market shifts, and then how it’ll perform in the subsequent bull market. If you backtest your system over several decades, 10, 20 years preferably, then you’ll see how it performs through all of these market cycles and that will give you the confidence to follow those rules, no matter what.

Click the link below and download my trading system confidence cheat sheet, if you want to start sleeping well at night, as a trader. My name’s Adrian Reid. This is Enlightened Stock Trading. I’ll see you in the next video. Bye for now.