Date: 1/11/2022
Author: Chris Hood
Be sure to check out new episodes of my video podcast each week, where my ace pupil Brian Jones and I talk the ins and outs of options trading- and give you insights and strategy that you can immediately put to work for you in the markets.
The one thing that is certain about the market is that it’s unpredictable.
Don’t get me wrong, I don’t buy into the Random Walk Hypothesis like some economists. Adherents to this theory believe the inherent chaos of the market makes it impossible to beat buy and hold returns by trading or sound investing.
Professional traders are living proof that this is bunk.
If outperforming the market using chart reading, technical indicators, and historical trends is impossible, I couldn’t consistently make money.
What I mean about the market is that you can never know with 100% certainty if the market, or an individual stock, is going up, down, or sideways.
That’s why you must have a trading system that relies on solid and high-probability set-ups and pay close attention to managing risk.
Unless you’ve been hiding under a rock, you’ll know that the market just had a significant pullback.
Whether the Federal Reserve’s announcement on interest rates was the cause of the drop or simply acted as a catalyst for a healthy pullback on an overextended market is anyone’s guess.
Personally, I tend to think it was a bit of both.
My positions took quite a hit, and I ended up giving back all of my gains since October.
Oh well, that’s trading – you have to accept the good with the bad.
Though I knew that January could be a bit rough, I have to admit the depth of the drop took me by surprise.
There’s just no way to know for sure when it’s coming.
In options trading, each pullback wipes out thousands of retail trading accounts. Hopefully, you’ve been listening to my advice, and you aren’t one of the casualties.
My question for you is, “What are you going to do now?”
You could just quit trading.
In fact, that’s what most people do. And it’s one of the reasons there are so few great retail traders in the market.
Most people have no mental toughness.
I was re-reading Grandmaster Rickson Gracie’s autobiography, “Breathe: A Life in Flow,” a few days ago, and there are many lessons that apply directly to trading.
His mindset will serve you well in the market.
Once when surfing alone, Rickson decided to catch one more wave just as the sun was setting. But, unfortunately, he got smashed on his way out, and the ocean relieved him of his board.
He kept his calm as the current was dragging him out to sea and swam for two hours parallel to the coast before he could reach dry land.
Do you think such a near-death experience kept him off the waves?
Not a chance. Like a warrior, he made himself go back to the same beach the very next day to surf again.
Rickson writes:
“I eventually learned that the capacity to accept anything, especially death was the key to my physical, mental, and spiritual growth. All three of these elements must be balanced, because sometimes you don’t break physically but emotionally. Sometimes you have the physicality and the emotional control but are spiritually unprepared. Without a spiritual connection to both life and death, you can’t reach the next level of performance.”
That’s precisely why he is one of the greatest of all time.
So what do you think I’m going to do after the market ocean ripped away my profits.
Throw up my hands and quit?
Start pointing fingers and blaming others?
Invent an elaborate conspiracy against me?
No. I will do just what I’ve been doing for 20 years – assess the market, look for set-ups, and keep making trades.
After all, there are 50 more trading weeks this year.
In a couple of months, I’ll have made my money back and then some. A few naughty candlesticks on a chart is not the end of the world.
I KNOW what I’m going to do.
What about you?
Cheers,
Chris Hood
P.S. How would you like to get top market picks every single day delivered directly to your inbox? My colleague who Corey just took an intraday win of 27.56% on SOPA wants to put you ahead of the game. Click here to find out more.
Hot Stocks, Market Analysis, and Much More
