Tuesday, 12 November 2024

2 pieces of advice for these markets…

 
   
     
If you’re like me, the last week has been pretty nice.

It’s a lot easier to make positive returns when the entire market is ripping higher – who knew?

But the obvious question is whether we will continue on this path or make a correction… And the more important question is: When?

Now, this is where the crystal ball I don’t have would really come in handy.

I’d love for this newsletter to be a guide on how to pick tops and bottoms, but unfortunately I don’t believe that’s possible.

But I do think these moments are what separate the folks who do really well in the markets vs those who don’t.

Because, just like a downside move, a big upside move tests your nerves.

“Is it overbought?”

“Do I get out?”

“If I am not fully deployed, do I chase it?”


All those questions come flooding in.

And most people make the decision on some intersection of “fear” and “greed”...

Neither is a great way to make a decision.

So let me just offer you two pieces of advice that I think are more objective and can serve you well in this environment:

 
1. Use Momentum
2. Zoom Out

You’ve probably heard me give both of these pieces of advice before, but I think they’re worth noting again.

In a market like this, I really believe momentum is king.

The pushback I get on that is that the market will eventually drop. Of course that’s true and I’ll take some hits along the way… But I won’t miss the “meat” in the middle.

Gold is a perfect example.

I’ve been long gold since last year when it broke out.

It got “overextended” six months ago and I ignored it and followed momentum.

 
 
This week, gold is pulling back hard.

But should I have got out when it was overextended? Well, the price is still way above those levels so no! 

It’s like my friends who have been in cash since 2020 and text me with an “I told you the market was gonna crash” when we got those 5-10% corrections in April, July, and September…

Well, yeah, they avoided those drops but they also missed the market being up over 100% since then!

Which brings me to the next point: Zoom out.

When the market starts going crazy, most traders get locked into a few day or few week period.

That’s never a good strategy in my opinion…

If you’ve never looked at a monthly chart, let today be the day you start.

It really helps give some perspective.

Take Bitcoin for example…

Here’s what it looks like over the last 6 days on the meteoric rise from $66k to $89k

 
 
A little overcooked, I’d say.

But just by switching timeframes, it looks like only the beginning of a breakout on the monthly chart:

 
 
I think this is one of the most overlooked things you can do as an investor and it really helps keep your perspective in check.

And all that to say, yes, I am still bullish until we see momentum flip on a longer timeframe ;)

By the way, I am going to be talking about my flagship strategy for trading these markets, Automated Options during a special live webinar this Thursday.

Make sure you register here

Nate

 
   
 

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