Note: In just a few days, our colleague Jeff Brown will share the details on a unique market opportunity… one he believes could transcend the current market chaos.
He says the headlines about Tesla being in trouble are missing the bigger picture. In fact, he says that the negativity is giving you a chance to profit that most people will miss. Because Tesla is about to make a move that could send a handful of small companies surging…
If you haven’t yet, be sure to sign up for The Robotaxi Emergency Briefing on Thursday, April 10, at 1 p.m. ET… You can do so with one click right here.
There’s nothing quite like a market rout to capture investors’ attention. And last week’s plunge certainly did that.
The market took a sudden, massive turn lower when President Trump announced the size and scope of his tariffs in his “Liberation Day” speech. The market expected far less than his aggressive tariffs on nearly all U.S. trading partners.
On Thursday, the S&P 500 dropped 5%… then had a similar-sized fall on Friday.
By Friday’s close, the S&P 500 had lost 10.5% in just two days. It was down around 17.5% since peaking in late February.
The Nasdaq fared worse. Its nearly 22% fall (as of Friday’s close) put it in bear market territory. Even the Magnificent 7 struggled to catch a bid…
And the pain looks set to continue this week… with the market chopping around as it tries to figure out where to land.
That’s why I want to help you maneuver in this environment.
On Thursday and Friday, for example, we were taking profits like 28.1% and 30.3% in my services – and no losses. I just recorded a special briefing where I talk about my strategy for profiting amid these tariff whipsaws. If you’d like to learn more about how I spot trade setups, then you can watch right here.
In the coming days, I expect we’ll see sharp counter-rallies, which often follow brutal falls. Yet these moves will likely be short-lived. So it’s vital to be on the ball with timing your trades.
Whichever way you slice it, this market action reminds us about the most important part of trading… You always, always have to manage your risk…
Primary Focus
Many people resign risk management to an afterthought. Surely if they can bank enough profits, that will more than make up for any losses that come their way.
But that thinking is backward!
Unless your risk management process robustly protects your capital, it’s only a matter of time before a market shakedown puts you out of the game.
Even a small move can rip a hole through an over-leveraged or over-exposed account.
It’s basic math. If you lose 50% on a trade, you need to make 100% to get it back. And that only brings you back to square.
To profit, you’ll have to do even better than that… which is much easier said than done in a highly volatile market.
More often than not, traders take on low-probability trades in the hope of recovering their losses with big wins.
But that only leads to a downward spiral – and ultimately puts them out of the game…
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Diversification Won’t Help
And if you think diversification is going to help you, think again…
A common misconception is that spreading your investments over 50 or more stocks, for example, will dissipate the impact of a brutal sell-off.
But that offered little help last week.
When investors all head for the exits at the same time, even high-quality stocks get dumped along with all the others.
That’s even more true if they’re coming off high – and ultimately unsustainable – valuations like the Magnificent 7. With markets in complete “risk off” mode, even safe havens like gold got caught up in the selling.
Likewise, Bitcoin (BTC) didn’t escape the carnage. After initially holding up, BTC played “catch up,” losing around 10% in two days.
Hardly anything was spared.
If you’re over-exposed or too leveraged in a blanket sell-off, it’s a long and painful process to recoup even a portion of those losses. And that’s what throws most people out of the game.
That’s why I’ve been repeating time and again that you should only trade a small portion of your account on any one trade (such as 2-3%). And you should never trade with money you can’t afford to lose.
Learning to manage risk correctly was the single most important lesson that enabled me to make it as a trader.
So think risk management first… and profits second. That will greatly enhance your chances of making it as a trader – and avoid pain during market sell-offs too.
Happy Trading,
Larry Benedict
Editor, Trading With Larry Benedict