Markus Heitkoetter
Rockwell Trading
How I’m Preparing For The Next Market Crash
If you’ve ever read Douglas Adam’s Hitchhiker’s Guide To The Galaxy, you’re familiar with the term “DON’T PANIC!”
After the recent drop in the market, you may have been asking yourself, “what am I going to do?” or “what if it happens again?”
What should you do when and if the stock market crashes… again?
There’s one incredibly important thing to remember:
Always follow your plan!
What am I doing now to prepare for the next crash?
Let’s talk about what happened this week in my 20k account.
In this account, I’m using my PowerX Strategy to find my trades.
Using my trading plan, I take the trades that the PowerX software recommends.
Out of those trade recommendations, I ONLY take the trades that fit my plan.
As of today, the PowerX Software recommended 70 trades total. 31 of these trades matched my plan and 22 had order fills, or were executed.
After Thursday’s (June 11th) huge drop in the market, I had to exit a LOT of those positions.
Out of all those trades, only 5 were profitable… but I still have 4 positions on.
Wait a minute… this means I only had a 28% winning rate, right!?
Or after the crash, I lost 72% of my trades?! That sounds pretty bad.
Don’t traders always want to have high winning rates?
Yes! But even when we can’t win 80% or 90% of the time, we still practice trade management.
What is trade management?
We can limit the downside potential to any losing trade by sticking to our trading plan. What does this mean exactly?
In this particular instance, I am referencing your entry and exit point.
Before any trade is taken, you should have an entry and exit point already defined. Meaning you know exactly when to buy and sell the stock or option.
If the trade goes against you, you always stick to your plan and use your exit strategy.
Too often I see traders that hold onto losing trades way longer than they should, just hoping things will turn around… and let me tell you, they rarely do.
That’s why it’s important to STICK TO YOUR PLAN!
How did I do after Thursday’s drop?
So… after I closed out the losing trades totaling $2,365, and the winning trades of $2,273, I am only down a total of $362 dollars.
This means the average value of my winning trades is more than DOUBLEthe value of my losing trades…
So after the huge drop in the market, I managed the losing trades by sticking to my trading plan. What’s the good news?
I still have 4 remaining trades left… and all I need is one of them to be profitable!
How to manage your emotions during a losing week
You may have seen the awesome coffee cup that I use during my “Coffee With Markus” YouTube Series? I use this mug every day.
It says, “Trade what you SEE, not what you THINK.” It reminds me every day to be objective when trading the markets.
It reminds me to trade what I see, not what I feel.
It’s important after a week of losses to remember this: You MUST prevent your emotions from getting the best of you.
It’s perfectly fine to have emotions. Scream. Yell at your computer! Let your dog know how frustrated you are… just don’t let your emotions influence your trading.
Many traders will take their frustrations from a losing trade and chase after the market. This is called revenge trading, and it’s a spectacular way to lose even more money.
Never let your emotions get the best of you.
What’s the secret to winning during a stock market crash?
Keeping your losses smaller than your wins and sticking to your trading plan. It’s really that simple.
So if the news (that has been nothing but BAD lately) has you asking, “When Is the next crash coming?!”
Or…”Is the next crash already here?”
I have news for you! It does NOT matter..
I do not care what the markets are doing!
I only trade what I see, not what I think.
Follow your plan and remember… hope is not a strategy.
So, if the markets turn and your trade is no longer profitable, stick to your trading plan and get out.
This will always keep your losses smaller than your wins. This is really the key to consistency and success in trading, no matter the market conditions.
Trading Futures, options on futures and retail off-exchange foreign currency transactions involves substantial risk of loss and is not suitable for all investors. You should carefully consider whether trading is suitable for you in light of your circumstances, knowledge, and financial resources. You may lose all or more of your initial investment. The lower the day trade margin, the higher the leverage and riskier the trade. Leverage can work for you as well as against you; it magnifies gains as well as losses. Past performance is not necessarily indicative of future results.
Editors’ Picks
EUR/USD struggles for direction amid USD gains
EUR/USD is trimming part of its earlier gains, coming under some mild downside pressure near 1.1730 as the US Dollar edges higher. Markets are still digesting the Fed’s latest rate decision, while also looking ahead to more commentary from Fed officials in the sessions ahead.
GBP/USD drops to daily lows near 1.3360
Disappointing UK data weighed on the Sterling towards the end of the week, triggering a pullback in GBP/USD to fresh daily lows near 1.3360. Looking ahead, the next key event across the Channel is the BoE meeting on December 18.
Japanese Yen bulls have the upper hand as hawkish BoJ outlook offsets risk-on mood
The Japanese Yen remains on the back foot through the early European session on Friday, though it lacks bearish conviction amid hawkish Bank of Japan expectations. Traders have been pricing in the possibility that the BoJ will hike interest rates as early as next week.
Editors’ Picks
EUR/USD struggles for direction amid USD gains
EUR/USD is trimming part of its earlier gains, coming under some mild downside pressure near 1.1730 as the US Dollar edges higher. Markets are still digesting the Fed’s latest rate decision, while also looking ahead to more commentary from Fed officials in the sessions ahead.
GBP/USD drops to daily lows near 1.3360
Disappointing UK data weighed on the Sterling towards the end of the week, triggering a pullback in GBP/USD to fresh daily lows near 1.3360. Looking ahead, the next key event across the Channel is the BoE meeting on December 18.
Gold losses momentum, challenges $4,300
Gold now gives away some gains and disputes the key $4,300 zone per troy ounce following earlier multi-week highs. The move is being driven by expectations that the Fed will deliver further rate cuts next year, with the yellow metal climbing despite a firmer Greenback and rising US Treasury yields across the board.
Litecoin Price Forecast: LTC struggles to extend gains, bullish bets at risk
Litecoin (LTC) price steadies above $80 at press time on Friday, following a reversal from the $87 resistance level on Wednesday. Derivatives data suggests a bullish positional buildup while the LTC futures Open Interest declines, flashing a long squeeze risk.
Big week ends with big doubts
The S&P 500 continued to push higher yesterday as the US 2-year yield wavered around the 3.50% mark following a Federal Reserve (Fed) rate cut earlier this week that was ultimately perceived as not that hawkish after all. The cut is especially boosting the non-tech pockets of the market.
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