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.
It’s a common saying that history repeats itself, and there is perhaps no area of life where this is truer than in the stock market.
As a professional trader, I’m in this for the long term.
Some of my positions are going to be home runs; others will just net me small gains. I’ll take whatever the market gives.
I know I’ll also take losses and plan for this so it doesn’t bother me.
The only thing that matters is that I hit my weekly, monthly, and yearly profit goals. Since I rely on trading to pay the bills, I stay in the market year-round.
From my experience and historical data, I can say with some certainty that it isn’t an easy month to trade.
Always keep in mind that the seasons of the market should influence how you trade.
So, if September is so risky, should you even trade at all?
I can’t answer that for you.
Obviously, you could look to the past and decide to just pull out of the market entirely until the better market conditions from October to January.
It’s a strategy that might keep your capital completely safe. But, still, you aren’t going to make any money the golden opportunities that arise.
Despite seasonal trends, the market can and often does get off the script.
Pay close attention to historical data for context and perspective, but understand that what has happened doesn’t predict the future.
No one has a crystal ball.
“Trading exclusively on market history is like driving your car while looking through the rearview mirror. Eventually, you’re going to crash into a tree.”
So keep your eyes on the road.
Trade the chart that’s in front of you.
Assuming you decide to trade actively during September, here are a few guidelines that can help keep you safe.
When market risk goes up, keep a higher percentage of your trading capital in cash.
Cash is a position – and it’s the only one that is 100% safe.
Decrease your profit expectations, and lower the size of your positions. Uncertain months are not the time to go in hard and heavy.
No matter what’s happening in the overall market, some ETF or stock will be rising in a bull market. You just have to find it.
A watchlist is essential.
Filtering potential trades and finding high-probability set-ups becomes even more critical in the September market.
Don’t just throw money at every trade you see.
Make sure your risk is on the very best set-ups. The market will punish you for every mistake.
Take Profits Quickly
Volatility, low market participation, and the potential for sell-offs mean that if your call is up 20% today, it might be down 80% tomorrow.
Revise your rules to snatch that money while it’s there.
This is especially true if your plan includes lots of credit spreads.
I’ll normally take my profits at 70% of max gain in a robust and rising market. However, I’m perfectly okay with a quick 30 – 40% gain in choppy conditions and elevated downside risk.
Bank your profits when and where you can.
Follow these three tips to keep your portfolio safe while we wait for the Fall.
Ideally, we’ll head into October with lots of capital and be ready to make the most of the end-of-year rally.
“Patience is bitter, but its fruit is sweet” – Aristotle
Don’t be discouraged – be PATIENT and PREPARED.
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