Regular readers know I’ve worked as a trader for over 35 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 this year’s turbulence.
Through the first three quarters of 2022, the S&P 500 fell around 25%.
Yet, I helped subscribers of my options trading service, The Opportunistic Trader, return 155% on their cash over that same period.
And we’re going to wind up the last quarter of this year in an even better position.
Some readers may wonder how we’ve managed to beat the markets… and avoid the carnage many portfolios have seen this year.
So this week, I’m going to share some of the insights that have allowed me to profit not only this year… but also during my decades on Wall Street.
In simple terms, I have seven rules of trading.
Let’s dig in with the first…
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 my second rule of trading…
Rule No. 2: If you’re experiencing personal problems, do not trade.
If you’re going through a tough situation, then 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.
Have the Right Mindset
It might seem counterintuitive that my first 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. That’s why these are my first two rules.
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.
Tomorrow, I’ll continue with the next two rules on my list… So keep an eye on your inbox for that…
Regards,
Larry Benedict
Editor, Trading With Larry Benedict
P.S. If you’d like to learn more about how to join us at The Opportunistic Trader, I’m happy to share the details with you. Simply go right here for all the info.