With the recent market choppiness and volatility, it is important to remember that investing is a marathon, not a sprint. While the ultimate goal of investing is to make money, our day-to-day job is to manage risk. Preserving capital during tough periods allows us to stick around for good cycles. We must live to trade another day.

Today’s online brokers make overtrading easier than ever, but staying in tune with the market and waiting for the “fat pitch” is what separates the professionals from the amateurs. So, if the market is in a tough period we position size accordingly or sit out completely. The position sizing an investor chooses can greatly play into results. It can prevent us from getting shaken out during normal noise and avoid large draw downs.

Furthermore, we want to move our capital methodically into concentrated positions. Instead of plunging into positions all at once, we want to wait for the market to give us confirmation and build our positions over time. This method will prevent us from throwing good money after bad. Each trade is just one trade in one cycle, of what will be thousands of trades. Often times, the patience to sit out of markets is underrated, while stock picking can be overrated. It’s this patience, persistence, and discipline that will pay off over time. As Bill O’Neil professes, “What you’ll find is that little acorns can, over time, grow into giant oaks, and that with persistence and hard work, anything is possible.”

If you have any questions, you can always reach us at (800) 424-9033 or at reachus@marketsmith.com.


Best returns,

The MarketSmith Team