Two Major Stock Market Lessons We Need To Take With Us Going Forward – Mike Swanson (11/23/2018)

I hope you had a Thanksgiving and now the masses are rushing to the shopping stores and the Wal-Marts fighting the crowds to get a bargain.

Well I have one for you that you don’t have to fight to get and can help you actually not only save money, but make it too:

http://wallstreetwindow.com/beta/cybermondaytrial.htm

The stock market finally went up on Wednesday, but the action was weak so things faded on the close a bit.  With the market set for an early close today no matter what happens there won’t be any 3:00 PM sellers today even if there are some on the open!

But let’s hope for an up day!

I did a video trading session Tuesday in which I gave my own views of the market you can watch by going here:

Special Live Trading Session – Where Is This Stock Market Going Now? – Mike Swanson (11/20/2018)

I also posted a video of a crying hedge fund manager that struck a chord with many people.  You can find this video here.

Watch This Fund Manager Cry Over His Wipeout Losses In Natural Gas – Full apology video – Mike Swanson (11/21/2018)

One person wrote to me about this money manager the following:

Hi, Mike:

That video of the fund manager apologizing and hardly able to keep his voice from cracking with emotion is incredible. It’s the first time I have ever seen anything like this. I would never have believed that any of these investment managers would care that much about their clients. To be in such a state of mind, he must have lost a ton of money. I guess after seeing this, I won’t beat myself up quite as bad because my accounts are all in the red. Thanks for sharing the video.

Charles

My reply:

It is certainly a remarkable video.  I suspect that he was trading on the edge at least doing something very risky in order to lose everyone’s money so quickly.  But the video actually reminded me of something I saw in January of 2008 – and something that happened to me.

I got bearish on the market in the Fall of 2007, but was in cash on New Years Day 2008.  The market fell hard that January and got so oversold that I decided to look for a bounce.

I wasn’t the only one.  In fact bears like Marc Faber were saying the market should bounce.  It was simply so oversold that it seemed like it had to happen.

I didn’t do anything risky.  I just went from cash to putting close to 100% of my money into SPY thinking it would be a good trade and how much could I risk on SPY with a simple 5% stop loss.  SPY is not a leveraged ETF.  Everyone owns it.

Well that weekend was the MLK holiday and over the those three days global markets continued lower and the DOW was set to open down 1,000 points.

There was a young futures trader at the time doing live youtube videos showing his account who completely went bust during that weekend action – as the futures market is always open.

As he live streamed his account going down the drain he didn’t cry.

Instead he shook in his chair and cursed and banged the table at the stock market trends he went against.

But I also was worried, because the big gap down to come I thought could lead to a possible stock market crash.

So here I was just trying to play a bounce not doing anything risky mentally prepared to possibly lose 50% of my money if a 1987 style crash came.

I actually slept well that night, because I came up with a plan if it did crash.  If the market fell all day I was going to sell out on the close and look to buy after the dust settled.  I figured I could get hit hard, but so would everyone else and I’d make much back up by having cash to buy after the selling ended.

I had a plan for the worst so was ready and slept fine.

But I got lucky.

Instead when the market opened Tuesday the Federal Reserve lowered interest rates by 75 points and forced the stock market to go up.

So I didn’t lose a dime.

But that day I never forgot.  I saw one guy wiped out on Youtube and also saw the market do something very dangerous that could have led to a disaster.  We all made a mistake though thinking that a market oversold was a buy when there really wasn’t a panic washout to signal a bottom before that weekend.

The action though showed me something was wrong with the market in 2008 even if the Fed action made people think everything was going to be fine.  The masses in the market had no idea how lucky they were.

But their luck ran out months later even though some got out in time and a few even positioned themselves to profit from the coming collapse.

Let’s hope that doesn’t happen again, but understand that it can.

This experience also taught me two huge lessons.

First of all if you try to go against a trend even for a short-term trade you are taking on big risks and probably won’t make any money.  So right now in this moment most people are doing just that ignoring the market decline that began in October trying to play any rally that comes when they should wait until the market decline ends first.

And the second lesson is to never put all your money into one thing.

I did that in January of 2008 without margin without big risks and it almost got me.

I did that in 2014 with gold stocks trying to get in before a bottom and that got me at the time.

And I have not done that ever again ever since as THIS IS THE SINGLE BIGGEST MISTAKE people make – whether they are money managers or small investors.  If you put all your money into one thing or one market it will eventually get you.

But most people today are doing just that – they have all their money in the US stock market as if they think that things can never go down again.

Watch out for trading experts who only tell you about the money they have made and never tell you about the losses they had that taught them the hard lessons.  I don’t know a single successful trader or investor who did not lose money at some time and learn from it.  Whenever I hear someone tell me they never lost and never will I don’t believe them.  How many such people were promoting Bitcoin going to 100,000 last year?

Every market moves in cycles so if someone is 100% in one single thing and it goes down they often end up selling in panic and making a mess.

It’s not their emotions that cause this – but the mistake of putting everything they own in one thing – basically making one single bet with their finances.

But that’s what almost everyone is doing today.

The crazy thing is there are plenty of ways to actually make money in the market now.

Volatility helps trades, but some things break away from the stock market and go up on their own.

That’s my focus in my seven position trading account and why it is up now since I opened it on Labor Day.

You can get into it with this special discount that ends on Monday:

http://wallstreetwindow.com/beta/cybermondaytrial.htm

-Mike

 



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