Regular readers know I’ve worked as a trader for around 40 years.
I ran a multimillion-dollar hedge fund for decades… and even helped our clients make $95 million during the 2008 financial crisis.
And that experience has helped me guide my readers through the market’s ups and downs.
In 2022, while markets plummeted, my S&P Trader service handed us 255 winning trades. If you just traded one contract for each of our trades, you would have ended up the year with $8,898. (If you traded two contracts for every trade, then double that number.)
And last year, when the stock market soared, S&P Trader handed us 270 winning trades. Anyone trading just one contract per trade would have ended up with $11,456 in their pocket.
Some readers may wonder how we’ve managed these kinds of returns in up and down markets.
So today, I’m going to share two rules that have allowed me to profit during my decades on Wall Street and beyond.
Trading Rule No. 1: If You Aren’t Seeing a Good Trade, Don’t Force One
My first rule of trading is: Don’t force a trade. There are better ways to spend your time… And unlike a forced trade, they probably won’t lose you money.
If you’ve scanned the markets… studied all your usual tickers… and still don’t see a good setup, then step aside and take a breather.
For example, I like to take long walks – sometimes over five miles a day. It’s what I do when I don’t see anything tradable in the market.
Just like me, you should try to find something to do that takes your mind off the market.
Take a long lunch… call a friend or relative… pet your dog…
It can be anything – as long as it helps clear your head. This is what will save you from getting into bad, low-conviction trades.
Above all, it’s important to remember that sometimes the right move is no move at all. Not losing money is just as important as making it.
And that leads me to a second rule of trading…
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Trading Rule No. 2: If You’re Experiencing Personal Problems, Do Not Trade
If you’re going through a tough situation, stay on the sidelines.
This one should be obvious, but plenty of folks force themselves to trade even if they’re not in the right headspace.
I see it all the time. Throughout my career, I’ve heard career investors tell me they never invest in a trade while going through a divorce or building a house.
It’s just too many distractions.
If you are having issues, that’s fine. We all do.
But you shouldn’t trade through those problems.
The market isn’t going anywhere. You should only trade when you can fully implement your process with a clear mind.
It might seem counterintuitive these two rules of trading involve not trading.
But in reality, deciding not to act is just as important as picking the right price or timing an exit perfectly.
If you feel like you must make a trade… or if you’re distracted or desperate… then you’re likely to lose out by entering the wrong trade or staying in a trade too long.
Neither is a good path to profits.
Regards,
Larry Benedict
Editor, Trading With Larry Benedict