Stock Market Update

Welcome to this week’s Enlightened Trader Newsletter. We have a bit of a bland situation in the markets right now… you can see on the chart below that the major stock markets I follow are bouncing off support but have really gone nowhere in the last few months. The markets are just range trading looking for some real direction.

If this support holds we might have a bit of a rally here, but to be honest I am not holding my breath… I just follow my systems diligently and know that eventually there will be clear direction and things will start working easily again.

This is probably one of the more frustrating market conditions because we just get chopped up entering and exiting trades waiting for the market to pick a direction. I am sure you are feeling the pain here – because we all are.

As traders we go through periods like this, and it sucks. The markets at the moment feel like waiting in line at Disneyland for 2 hours to go on a 2 minute ride with your 5 year old… Not very rewarding, and kind of painful.

These types of market conditions come around every now and then – I have been trading for over 20 years and there have been several times when the markets felt like this. There are a few things that will help you get through with your sanity (and your account) intact:

1. Risk Management: When you are getting chopped up by the market’s lack of direction the worst thing to do is be trading big. Death by a thousand cuts is painful, but if you let those cuts get too deep, then you could be dead in less than 50 cuts. Keep your risk per trade low! Note that I don’t actually advocate reducing your risk per trade here; I just keep my risk per trade low at all times.
2. Diversify: The reality is we don’t know which way the market will go from here. It could go up or down. There could be a long term move or a short term move. So if you trade long only Australian stocks with a single long term trend following system then you MIGHT be ok if the market suddenly becomes bullish and trends strongly… but that is pretty unlikely and so you might want to think about diversifying into some different strategies / markets / timeframes to help reduce the pain and lower the probability of getting stuck facing the wrong direction.
3. Confidence: When you are getting chopped up and sitting through a drawdown it is hard to keep going unless you have rock solid confidence in your trading systems. If you have any uncertainty or doubts they will eventually get the better of you and undermine your trading decisions and cause you to lose money. The solution is to double down on your backtesting and analysis to understand exactly how your systems are behaving and monitor their performance to ensure it is within normal bounds.
4. Patience: Too many traders are impatient to turn their trading account into a regular paycheck. If you are constantly thinking about trying to bank regular profits instead of just focusing on executing your systems faithfully then the frustration will grow until it causes some irrational action that undermines your survival as a trader. The market does this – it is ok and perfectly normal, as my kids would tell me – “Just Chill Dad”.

Trading Tip of the Week

Effective diversification is about bringing DIFFERENT, UNCORRELATED behaviour into your portfolio of trading systems. If you already have a long side stock trend following system then another long side stock trend following system is NOT the best diversification move.

If you trade long only then a short system is a brilliant move. If you trade stocks only then adding some crypto systems is a brilliant move.

Take a BIG step towards a diversified portfolio of systems…. not a baby, self-delusionary step. If you are going to survive long term you need solid diversification and you can’t afford to tinker at the edges.

Student of the Week

This week I want to highlight one of our members, Phil, in the Trader Success System who has been developing a new trading system from start to finish. Building trading systems from the ground up is challenging, and many times you will test an idea and find that it is not profitable or not worth trading.

Phill has had a solid go at developing a new system this week and made great progress. Even though this one didn’t work out, I am certain he learned a ton from the experience. I have tried hundreds of trading system ideas that didn’t work out, so he is right on track. Keep up the great work Phil! Keep going and you will find a great system that more than makes up for all the challenges along the way!

I also want to highlight an amazing couple in the Trader Success System – Patrick and Marion are absolute champions of diversification. They have been methodically building and diversifying their portfolio of trading systems. They now have trend following, mean reversion, short side and are working on rotational systems – fantastic work and inspiring perseverance and clarity of vision. Well done Marion and Patrick!

News from EST

This week we released a new service for traders who are really struggling with the psychological side of their trading. They are called TraderMind Mastery Sessions… If you are having trouble with the mindset side of trading and have a particular psychological challenge that you want to good deep in a one-on-one session to resolve once and for all, then this is for you!

You can book a single one-on-one session with either myself or coach Stephanie and have a focused deep dive session designed to help you eliminate psychological blocks to trading profitably, so you can achieve the results you deserve.

Our sessions are tailored to your specific needs and goals and can cover a wide range of topics, including:

• Managing emotions and stress in trading
• Developing a winning mindset
• Overcoming fear and anxiety
• Enhancing discipline and self-control
• Identifying and eliminating self-sabotaging behavior
• Developing a winning mindset
• Overcoming fear and anxiety
• Enhancing discipline and self-control
• Identifying and eliminating self-sabotaging behavior
• Improving decision-making skills
• …and much more!

If that sounds like what you need, then click here to schedule your TraderMind Mastery Session today!

On the Home Front

I was reminded during the week about the importance of fulfilment and pursuing my passions – doing the things that I love and minimizing the grind and angst in my life. I have been feeling in a bit of a rut and my frustration with life in general has been building over the last month or so. I figured out this week that it was happening because I had been focusing exclusively on some urgent short term issues that really needed resolution, and I had not made time for things that I love and really light me up.

I think one of the big problems many people face is they don’t have enough things in life that light them up… I have neglected this recently and my mindset has suffered as a result. The crazy thing is even 5 minutes of doing something just for you that you love can transform your day. Take the time to do it, even if it is just 5 minutes because it will make the world seem brighter and more hopeful and that helps everything.

If you don’t know what to do, just pick one of mine:

• Stand in the garden, smell the flowers, and admire the complexity and beauty of how the plants grow
• Pick up the phone and call someone you care about
• Read a book that is just for fun
• Play with the dog
• Go for a wander and explore somewhere new
• Meditate
• Go for a run / ride / walk
• Sit on the beach and listen to the waves
• Think about something that makes you smile
• Write down 5 things that you are grateful for
• Think about / do something other than work or the markets

It doesn’t take much to brighten your day… and it doesn’t take much time or money either 😉🤩

Remember – You’re Only One System Away!

Adrian

Founder, Enlightened Stock Trading