You are probably scratching your head at the headline here. I feel like I can already hear you asking me…
“Tom, the Dow just passed 30,000 for the first time ever. How on earth could we expect the market to melt down any time soon?”
Well, I’m here to give you a reality check…
It’s not about what happened on Tuesday or Monday or the week before last or anytime before that. Successful trading happens one day at a time.
Let me repeat that again for emphasis. One. Day. At. A. Time.
This is something successful traders keep in the forefront of their minds at all times. Because here’s what happens: On weeks like this week, some traders – especially the inexperienced ones – get the impression that every week in the markets is going to look like this one.
Here’s another reality check: Every week in the markets is not going to look like this week. That’s a fact.
The Sugar Rush
Now, this may seem obvious to you and most traders. But what ends up happening?
Well, I like to think of it like a little kid on a sugar rush: A little girl gets a lollipop from her mother. She eats the lollipop. Maybe she eats a second lollipop. Then the rush from the sugar hit – it’s a kind of euphoria.
The feeling is good… but it starts to wear off. She reaches for a third lollipop. She gets an even bigger rush.
Maybe she reaches for a fourth lollipop… maybe she doesn’t… It’s tempting. But sooner or later the sugar crash comes. And the more lollipops she’s had, the worse the crash is. That’s when mom all of a sudden has a cranky toddler to deal with.
This example may seem kind of silly, but believe me: The exact same thing happens to traders all the time.
In fact, the “sugar rush” is what I refer to as the first phase of a market meltdown. The second phase is that the markets start to dive. And when that second phase comes, let me tell you: It happens fast – way faster than the sugar rush phase. And it wipes out enormous amounts of wealth.
So why am I telling you about this right now? Well, by the looks of it, we are in the midst of a sugar rush at this very moment. And I’ve seen this before. I know what’s coming next.
Winning the Day Trading Game
As many of you know, I’ve been trading professionally for the better part of five decades. I’ve seen and done it all when it comes to investing.
A pivotal moment for me was when I saw the markets crash back in 1987. I saw how quickly wealth could disappear. I saw livelihoods wiped away literally overnight.
It became clear to me that all of the techniques and strategies that my career in investing had been based on up to that point were flawed. I knew that if I kept on following those philosophies, I would be exposing myself and my clients’ to an undue amount of risk.
From that point on, I started approaching the markets very differently. I began immersing myself in high-percentage day trading techniques as opposed to the more “traditional” approaches I had been following. I started looking at every single day with new eyes. And I saw how much risk I was effectively eliminating by following this new philosophy.
It’s been more than thirty years since that pivot in my career, and it has made a world of a difference. The concepts that I’ve mastered since then are the same ones I talk about in my bestselling book – Winning the Day Trading Game.
Balancing Fear and Greed
Everything I discuss in my book is precisely what has made me and my subscribers so successful since I made the big change.
But if there’s one nugget that feels particularly relevant during this sugar rush it’s this: You have to know how to balance fear with greed. If you are blinded by greed when the markets are booming, you are just asking for trouble. It happens every time there’s a sugar rush. Somehow, investors seem to make the same mistake over and over.
On the flipside, if you’re too cautious when things look bearish, you’re probably missing some great opportunities.
The good news is, the concepts in Winning the Day Trading Game will allow you to succeed no matter the market condition – whether we’re in the midst of a sugar rush or on the precipice of a meltdown. It will allow you to stay confident every single day that you’re trading.
So be careful with those sugar rushes. Remember to always take things one day at a time. And like I always say…
I’ll see you on the flip side,
Tom