This week wasn’t a pretty one for me…
As most of you know, I’ve been aggressively bullish all year in 2024.
Even with big dips in August and September, I went right back to the well and traded aggressively to the upside.
That game plan has suited me very well this year. I’ll have the best performance in my own investing ever this year unless something goes dramatically wrong in these next 60 days.
I’ve had mostly “I told you so” moments as of late.
But here’s the reality:
No matter how “right” you are, this is still a dynamic market. You’ll take lumps along the way.
In my case, I am mostly taking lumps on the big red days. Like we saw yesterday.
- I went from having an Automated Option trade near the target to being a full loser…
- I had a Walmart trade fizzle out that I felt so confident about last week…
- I had one Overnight Option trade that some members hit the target and others didn’t get filled which is incredibly frustrating.
- I had one where it never got close to our target!
- I even had a gold trade in danger of losing (thankfully, it ended up as a winner).
But the point is: It wasn’t a good week for me.
And now comes the hard part: How do you respond?
It’s easy to say things like “keep swinging the bat” or “stick to the system” but I find for a lot of folks that’s easier said than done.
And so I would like to address that plainly in this letter in practical terms…
First, yes, it can be hard.
One customer wrote in after a loss that “Nate wants us to keep swinging the bat when our confidence is low”...
And, well, yes.
It doesn’t take much to swing the bat when you’re on a winning streak. The only time that advice matters is when you’ve taken a few swings and misses and you need to find that discipline.
Again, I am not saying that’s always an “easy” process, but it is a relatively “simple” process. And it’s when traders get disappointed or frustrated that I think really bad decisions get made.
I think over the years, I have gotten better at a lot of things…
I think I have gotten better at understanding market dynamics, I have gotten better at structuring trades with more advantageous risk/reward, I’ve gotten better at optimizing strategies…
But I have gotten a lot better at taking losses. And that might actually be more important than the rest combined. Because if you throw your approach out the window when things get tough, none of them even matter.
I think it’s easy for most of us to agree, in theory, that a strategy or system or approach is meant to work “over time”...
You could never judge a trading system on a few trades or even a few months that’s designed to win over the next decade.
Easy to agree with in theory, harder to buy into when you just took it on the chin, right?
Now, I wish I had some amazing advice for how to overcome all of that. I am sure there’s a book out there that would give a lot better ideas than I can…
But my approach is simple: Extend the timeline in your own mind.
What I mean is, if I start a new $10k account for a strategy just to lose a few trades out of the gate and watch the account dip to $8k, it can immediately feel like a bust.
Like, here I am, trying to make money and the account is shrinking fast.
But then I remind myself that my goal wasn’t to make $1k and then withdraw the money… I am not starting this account to pay my grocery bill (I really wouldn’t recommend that!).
My goal is to build something over time…
And if I am successful a year from now or two years from now, it won’t matter that the account dropped to $8k at the beginning.
I shouldn’t make long term decisions based on a short term circumstance.
And so, for me, I really try to think about where I am intending to go over the long term because the truth is harsh:
If I can’t handle a little bump this week, I am never going to reach my goals years from now… There will be far worse stretches than this week along the way!
(I told you it was harsh!)
I mean, let’s be real:
I’ve had a down week. That sucks. I had some in March, August and September. They also sucked. By just sticking with my approach, I was at all time highs in most of my accounts a week or two later..
What about when it’s not a bad week, but a bad month or few months?
If I get shaky on one bad trade, a 3 month drawdown is going to knock me out.
I often compare it to the folks who pulled out of the stock market in 2008 and nearly 20 years later never got back in.
It’s not that the pain they felt in 2008 wasn’t real… They might have even saved themselves some additional pain if they got out before the very bottom… And, sure enough, they avoided all the future market corrections by being out.
But look at what they missed, folks. Look at what they missed!!
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