Five Urgent Moves to Reduce Risk  | BY KEITH KAPLAN
CEO, TRADESMITH |
There’s no time for a clever story that relates in some roundabout way to what we’re all seeing and feeling right now. Millions of Americans, myself included, woke up to blood red on Thursday. The benchmarks are collectively hemorrhaging trillions in value. The Nasdaq 100 Index (NDX) is down more than 5% as I write, the largest single-day decline since the pandemic crash in March 2020. That’s putting it dangerously close to the Red Zone, a key risk-off level determined by our algorithms. We’re experiencing an economic shift unlike anything we’ve seen before. Yes, in many ways, it’s an even bigger shift than the pandemic. Back then, the Federal Reserve did the same thing it did during the Great Financial Crisis. It slammed interest rates down to zero and started printing money to put assets on its balance sheet. We knew how to deal with that. This is different. We’re in a new, tariff-based economic regime that hasn’t been tested in nearly 100 years. It promises short-term pain for long-term gain. The former is clearly happening, but there’s no way of knowing if or when the latter will arrive. And to top it all off, the situation is fluid and can change at any time. And that’s really the theme running through my mind right now. We cannot predict the future. We should not speculate on it. And so, we must not let our imaginations and our emotions dictate what we do with our financial life. TradeSmith was built for moments of great uncertainty like this. Our founding mission is to show individual investors why data-based risk management is the only viable way to survive them. That’s why I’m writing you today – to remind you why we do what we do… And to show you, in specific detail, exactly what our algorithms are saying about how to manage this decline. In short: Now, more than ever, you need to minimize risk. | Recommended Link | | | | With consumer sentiment declining to levels that are historically considered the “bottoming zone”… this could be a really good time to buy stocks. Because big consumer sentiment rebounds out of the bottoming zone – coincided with major market rebounds, and abundant opportunities. Click here to find out what Luke Lango is recommending. |  | | That means avoiding costly investment mistakes that can undo all your hard work and wipe away all the gains from over the past two years. With the risk levels I’m seeing, that could well happen. That’s the bad news. But the good news is you control what happens next. To help you do that, I put together a checklist of “urgent moves” you should make right now – today. And when appropriate, I’ll also show you how to make them with our software tools. Let me walk you through those five moves now: 1. Don’t Get Buried in a Hole Stocks are currently taking the elevator down after a two-year escalator ride up. A lot of stuff is selling off, even if there’s no rational reason for it. It’s a matter of “sell first, ask questions later,” especially if you’re a large investor who’s trading on margin and needs to get out of a hole. And that’s what I want to talk about: margin. Most investors have the ability to borrow money from their broker and trade with it. During bull markets, this can be great if you’re in a position where that makes sense and you’re managing your risk properly. But when conditions have rapidly deteriorated, as they have now, you do not want any margin balance whatsoever. You don’t want to get margin called and be forced to sell your high-quality Green Zone stocks. (More on those in a minute.) If you owe any money to your broker, find your weakest holdings and sell them immediately to pay that money back. The best candidate is any stock in the Red Zone. 2. Drop Your Red Zone Stocks and Don’t Look Back To build on that last point, you need to stick to your plan. And if your plan is following TradeStops, you need to do the painful thing and sell any losers that have entered the Red Zone. It’s never fun to accept a loss. But refusing to take this critical action is like looking around at the grave you dug, realizing you’re stuck 6 feet under, shrugging your shoulders, and continuing to dig. You need to get out of the hole, and the best way to do that is to start climbing before it gets any deeper. Below is a list of stocks in the S&P 500, Nasdaq 100, and Dow Jones Industrial Average sorted by how recently they entered the Red Zone. Odds are strong that you own at least one of these stocks in your own account. Everything you see below got a Red Zone signal yesterday. Like it or not, if you hold these stocks, our algorithms say they’re a sell. Act accordingly: 
This is just 14 of 267 total Red Zone stocks from these benchmarks. There are also 29 new Red Zone signals just from yesterday, in addition to these. If you’re a TradeStops Plus subscriber or higher, you should be able to see where everything stands in your synced portfolio. 3. Find Where the Money’s Flowing Yes, markets have corrected severely and are on the cusp of a new bear market. However, as I said up top, we can’t tell the future. Yesterday’s price action could prove to be the bottom of this move. Or it could be the start of something much worse. We just don’t know. But what we do know is that every bear market in history was eventually followed by a bull market that took prices to new heights. Smart buys during bust times are what fortunes are made of in the boom times. So, what’s smart to buy in a bear market? Well, any stock entering or maintaining its Green Zone status right now, that’s what. And what do we find in our system? A ton of newly minted Green Zone names to take a serious look at: 
Look at all of these fresh Green Zone stocks. These are the names the money is flowing to in this rout. These are proving to be the safest home for your money as the market digests the tariff news. Add them to your watchlist, and if you’re in a position to, dive a little deeper to see if they have a place in your portfolio. 4. Heed Our Major Risk-Off Signals An important thing to understand right now is that while this market move is painful, it’s not yet met the conditions for a sustained downtrend. Not in the traditional sense (a 20% fall from the highs), and not in the much more effective sense that’s determined by our algorithms. Let’s run through the major benchmarks. S&P 500: Red Zone level is 5,381.88. It closed at 5,396.52 on Thursday. We’re a hair above a Red Zone entry, but not there yet. 
Nasdaq 100: Red Zone Level is 18,431.01. Currently trading at 18,521.47. That’s less than 100 points away from a Red Zone entry. 
Dow Jones Industrial Average: Red Zone level is 40,075.11. It closed at 40,545.93. That’s about 1.1% away from a Red Zone entry. 
Russell 2000: Red Zone level is 1,969.70. It closed at 1,896.50, putting it into the Red Zone. 
We also saw bear market signals trigger on the S&P 400 mid-cap and S&P 600 small-cap groups a couple weeks ago. In summary, small- and mid-cap stocks are where the most risk is right now. Large caps are not yet in the Red Zone but are dangerously close. If they get there, you’ll be the first to know. And that will mean that everything else I’ve told you today about selling Red Zone stocks and moving to Green Zone stocks will be that much more important. 5. Take a Deep Breath Now for some guidance that you’ll need to apply outside of our system. Financial stuff is extremely stressful. Never mind the stock market – for lots of people, just getting your bills paid is enough stress. Every day our lives become easier or more difficult based on numbers on a screen. It’s our responsibility to take care of these things. But we cannot ever let it consume us. I urge you to take some time this week, after you’ve settled what you need to do with your portfolio, to take a deep breath and do something that doesn’t involve knowing where the Nasdaq 100 is trading. Spend some time with your friends or family and leave your phone turned off. Take a hike in the woods or a swim in the ocean. Go for a drive, and instead of the usual finance podcast, put on your favorite album by your favorite artist. The market will be there on Monday. And eventually, it will get back to doing what it normally does – which is slowly go up. But you have to understand that you have no control over that. Try to find comfort in that fact. Mental health is a big part of risk management, believe it or not. If you’re not thinking straight, you’re not going to make the moves you should in a difficult period. Take some time to step away from the screens. Follow these five moves today, and I promise you’ll be better for it. Stay tuned right here to TradeSmith Daily for all the latest things happening in markets, and the steps we’re taking to help you protect your wealth. All the best, 
Keith Kaplan
CEO, TradeSmith P.S. As you can see, if you’re not a TradeStops subscriber, you’re missing critical info about your portfolio. You’re flying blind. You don’t know if what you own is flashing a sell signal or not. That’s a dangerous spot to be in. If you’ve been following along with us here in TradeSmith Daily and like what we write about, I can guarantee you’ll like the software we publish too. Click here to learn more about a TradeStops subscription. P.P.S. A great way to stay in touch is to follow me on X. I posted some exclusive insights there on Thursday that are required reading for anyone trying to make the most of this correction. Check them out here, and then follow my account for more. | 
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