The number theme I have reiterated to my clients globally (clubhouse members and others) through daily videos, email, texts and webinars over the past month and a half has been to respect this choppy market environment and to take a step back.
Trading in choppy markets is one of the easiest ways to lose money and your mind.
If we can learn how not to lose (much) money (a big part of this is learning when NOT TO TRADE), then making money just becomes a natural positive side effect.
In my experience and for any seasoned trader and investor, avoiding market chop and not fighting trends and sitting out when the getting is not good – that is called winning.
Remember, you don’t always have to swing for the fences in order to make money in the markets. In fact swinging for the fences is just about a certain recipe for disaster over time.
If you look at any successful hedge fund you will note that their returns usually come from just a few months of performance each year while the rest of the year they played great defense to avoid large portfolio drawdowns.
‘Offense wins games but defense wins championships’
I continue to hear from many of you how grateful you are to heed the call toavoid this choppy environment over the past six weeks or so and thuspreserve your sanity and precious capital.
Below is a chart of the CBOE Volatility Index (VIX), which continues to show implied volatility (i.e. the potential risk investors are pricing into the market) at very low levels, despite increasing geopolitical tensions, natural disasters, the ongoings in Washington and the usual seasonal weakness for stocks in the autumn period.
Enjoy the weekend! Anyone in the path of hurricane Irma, please stay safe.
Head Trader and Market Strategist