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If you haven’t watched yet, tune in right now.
As we cross the halfway mark of 2025, markets are trading at all-time highs. No doubt, plenty of investors are patting themselves on the back.
Of course, any win should be celebrated. I’m constantly reminding my subscribers that trading is all about putting a “P” (for profit) on the page.
But the risk after such big gains is that investors get too complacent. They believe that the good times are going to keep rolling indefinitely.
I don’t want to be like the boy “crying wolf” with constant warnings about an impending reversal. I’ll be the first to admit I’ve been too early on calling a dip.
But the signs of a bubble are growing… and it wouldn’t be the first time that the market knocks overly bold traders on their backs after a hot streak.
So today, I want to run through a mid-year checklist that can help you stay on your toes and continue profiting…
Stay Disciplined
One of the “problems” of a runaway rally is that investors can turn into spectators. Each new price level that’s taken out gives them another reason to cheer.
What’s not to like about markets breaking higher and ever bigger profits?
But investors can get caught up in all the hype. Discipline can quickly take a back seat.
Investors will hang on for even bigger profits while ignoring warning signs – like the fact that overbought stocks are increasingly vulnerable to a reversal. They might decide to ignore the level where they’d planned to exit… allowing greed to take the wheel.
Sure, you can probably get away with letting your discipline slip for a time. But the market has a painful way of reminding us of the reasons for that discipline in the end.
Instead, we should stay proactive. We need to watch the market closely on a technical level. This can include momentum indicators like the Relative Strength Index (RSI) and the Moving Average Convergence/Divergence (MACD).
If you’re not being proactive, you can miss signs of a reversal and get sucker-punched when markets finally take a turn.
(Again, I don’t want to overplay it… But after a 35%-plus rally in the Nasdaq in just over two months, you need to be prepared for a pullback. You don’t want to get caught flat-footed.)
Overbought signals can give you sufficient warning to start taking profits… or lighten your position overall. This can help you avoid handing back a chunk of your profits.
Midyear is also a good time to refocus on the basics…
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Rebuild Your Routine
One of the easiest things to let slip when markets are rallying strongly and volatility is low is your daily routine. It’s tempting to simply watch your stocks tick higher… and take the day off.
However, a consistent routine can make a big difference in your long-term success.
Look at your charts each day with fresh eyes to ensure that you’re not missing anything. Assess your open trades to make sure your theses still work.
And keep watch for new trades on the horizon. That way, you’ll have trades ready to go if conditions change.
The trick is to review key data every day. Not just when you feel like it.
This time can also let you evaluate and fine-tune your entry and exit strategies and overall risk management. Are your position sizes too big? Are you using stop losses? Even a small adjustment can produce much better results.
So by all means, enjoy the mega-rally. But don’t fall asleep.
Use the midyear marker as a time to reassess and refocus. Because things could get a whole lot more interesting in the second half of the year…
Regards,
Larry Benedict
Editor, Trading With Larry Benedict
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