What You Need To Be A Great Trader (it's not what you think)

Unless you live under a rock or on a desert island, or maybe even another planet, you're aware the stock market has been going down.

Notice when we started, we had the 50 day, the 100 Day and the 200 day moving averages. They were stacked on top of one another, and that generally shows a market going up.

Then about February 23rd, the 50 day crossed over the 100 day moving average, because the market was starting to trend down.

And then finally, in May, the 100 day dropped below the 200 day moving average. And we were really dropping then!

There was a rally up in July and August but the price action never overtook the price from earlier in the year.

Then the plummet started down in earnest.

Watch what I learned about the market this past week and how this one factor determines whether or not you are a great trader

I've become known for making really great returns in a down market. I was even dubbed the Disaster Queen by some of my friends who are also great traders.

I would buy puts to take advantage of the down movement and then exit when the movement would have run its course.

When COVID hit in 2020, I increased my portfolio balance by 43.3% in just 30 days.

So why am I struggling now in this downturn?

Well, when I'm puzzled about something, I ask myself a very clear "Why?" question. Then I go sit in my back deck and just kind of think and let my mind wander. So that's what I did last Wednesday, and the answer hit me like a lightning bolt.

Look at these two downturns and ask yourself the question "What's different there?".

Now I'm going to draw some support and resistance lines to help your mind's eye see what I saw.

Notice the angle of the downturn is much steeper during the beginning of COVID. That's where I made such great returns. That lasted just about 30 days.

The picture on the right is our current downturn. Notice the angle is much softer, and the period of the down is now almost two months. Quite a different look.

Not only is the market not going down at such a hard angle, there's another factor that's hurting my bought PUT positions.

The premium on those trades decays a little bit each day - that's Theta.

So the longer you hold a position, the less valuable that position becomes.

Because of time decay, the decay accelerates as you get towards the end of your expiration period. All those factors were hurting my current positions, folks.

Now the realization of those factors is great, but next I have to take some action and readjust my thinking and trading to match what's going on.

The action I'm going to take is to buy my long PUTs not two months in the future but I'm looking at three and four months out. That will eliminate that accelerating time decay factor.

That's what a good thinking trader does. They take the data and adjust their thinking to match what is actually happening in the market.

That is someone that has adaptability - the ability to change your behavior or ideas easily in order to deal with new situations. 

And that is my goal for you. To become a thinking trader.

Because as much as you may try, you can't wrangle the market, you need to flow with it. And if you're white-knuckling trades that have "worked in the past" you're going to lose every. single. time.

 We're training you not only to just trade, the mechanics of trading, but also to compound your gains through your own thought process. If this sounds good to you, and if you want to be the ultimate thinking trader and ramp up your game to the next level, you're going to want to join our investing buddies family. I've made it easy for you by giving you a free trial. Check it out by clicking below and thanks for joining me on this great adventure!