Lessons Learned From A Trading Profit Made Shorting Stocks – FX Empire

As the market is currently working on an upswing, we should keep in mind that the previous upswing was +$29.62 or +19.73%. Apple is giving us another opportunity to liquidate any remaining holdings anywhere from our current price level to over $160.

The Sign That The Trend For Apple Has Changed

It should also be noted that the 2020 Covid downswing from January 29, 2020 – to March 23, 2020, was -$29.50, -35.85%, 74 bars, and 53 days.

The current 2022 downswing from the $183 peak to the $132.50 low is -$50.68, -27.67%, 193 bars, and 139 days.

The 2022 downswing exceeds the 2020 Covid downswing in both price and time: -$50.68 vs -$29.50, and 139 days vs 53 days. This is a major red flag signal that the trend in Apple has changed.

Let us remember Jesse Livermore stated: “When trading stocks I always look for favored groups to get weaker and collapse.” “This usually meant a correction was coming in the overall market.”

This is how Livermore called the market turn in 1907, and 1929, as the market leaders rolled over first.

LEARN more about price action FROM OUR TEAM OF SEASONED Traders

In today’s market environment, it’s imperative to assess your trading plan, portfolio holdings, and cash reserves. Experienced traders know what their downside risk is and adapt as necessary. Successful traders manage risk by utilizing stop-loss orders, rebalancing existing positions, reducing portfolio holdings, liquidating investments, and moving into cash.

Managing risk and expectations for both investments in real estate and the stock market is the key for long-term success. Do this, and you can avoid the rollercoaster ride of doing nothing to protect your investments.

Successfully managing our drawdowns ensures our trading success. The larger the loss, the more difficult it will be to make up. Consider the following:

  • A loss of 10% requires an 11% gain to recover
  • A 50% loss requires a 100% gain to recover
  • A 60% loss requires an even more daunting 150% gain to simply return to break even.

Recovery time also varies significantly depending upon the magnitude of the drawdown. A 10% drawdown can typically be recovered in weeks or months, while a 50% drawdown may take years to recover.

Depending on a trader’s age, they may not have the time to wait on the recovery or the patience. Therefore, successful traders know it’s critical to keep their drawdowns within reason. Most of them learned this principle the hard way.

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At TheTechnicalTraders, my team and I can do these things:

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Chris Vermeulen
Chief Market Strategist
Founder of TheTechnicalTraders.com

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