Tariffs & Managing Risk Using "Trading in the Zone" Principles

Right now, the stock market is experiencing one of the biggest crashes we’ve seen since COVID. The panic is real, and the pressure is building up, but the key to surviving (and thriving) through this market storm is not to react with fear or emotion. Let’s break down how you can stay calm and manage risk using principles from the book Trading in the Zone by Mark Douglas.

What’s Happening in the Market?

The stock market is down sharply. This crash feels intense, and there’s a lot of fear about what could happen when the $NYSE opens on Monday. Could we see more drops? It’s possible. But one thing is certain: markets are unpredictable, and fearful reactions only hurt traders in the long run.

Just like the market, Bitcoin has been showing some surprising resilience.

Unlike stocks, Bitcoin didn’t drop as much, which makes many wonder why it’s holding up better during this crash.

This could be due to growing confidence in Bitcoin as a safe haven asset, but, just like any market, Bitcoin is still volatile. It can drop quickly, so keep your risk in check.

Using "Trading in the Zone" to Stay Calm

Mark Douglas, the author of Trading in the Zone, talks about psychological control as being crucial for any trader. He emphasizes that to be a successful trader, you must accept the uncertainty of the market and trust your process. Let’s break this down in relation to what's happening now:

1. Accepting Uncertainty
   One of the core principles of Trading in the Zone is understanding that you can never fully predict the market. Right now, the market is chaotic, and we don’t know exactly what will happen when the NYSE opens on Monday. But you need to accept this uncertainty. There’s no point in trying to control something that is out of your control. The only thing you can control is your reaction.

2. Mastering Your Emotions
   Fear is the biggest enemy when a market crash happens. The key takeaway from Trading in the Zone is that emotions like fear and greed cloud judgment. If you panic sell in a crash, you’re acting from fear, not logic. When the market is falling, and everyone is talking about doom and gloom, it’s easy to get swept up in the emotions. But the most successful traders are those who can stay calm and not get emotionally attached to the outcome of each trade.

3. Trading Without Expectations
   Douglas explains that expectations lead to frustration. If you expect the market to always go up or that your assets will keep rising, you’ll get upset when they fall. In a market like this, it’s important to have realistic expectations and prepare for both ups and downs. The key to staying calm during a crash is understanding that losses are part of the process and not something to fear. They are just a natural part of the game.

4. Risk Management is the Foundation
   Douglas highlights that the biggest part of trading is risk management. If you aren’t prepared for a drop in the market, you are setting yourself up for a much bigger loss. When the market crashes, and fear takes over, it’s crucial to have a clear plan and stick to it. Here’s what you should do:

   • Know your limits: Decide how much you’re willing to lose in advance. If you’re trading, don’t risk more than you’re comfortable with.

   • Set stop losses: Protect yourself by using stop-loss orders. This way, you prevent emotional decision-making when things go south.

   • Don’t panic sell: As Douglas says, if you sell because of fear, you’re not trading logically. Fear clouds judgment, and once you sell in panic, it’s hard to make rational decisions.

5. If You’re Not Prepared, Adjust Now
   If you didn’t prepare for this market drop and you're feeling overwhelmed, don’t panic. Here’s what you can do:

   • Step back and take a break: Sometimes, the best thing you can do in a time of market panic is give yourself space to think and reflect. When you’re emotionally charged, it’s hard to think clearly.

   • Reassess your risk tolerance: Look at your current positions and decide if they align with your risk tolerance. If you’re holding too much in one asset, it might be time to rebalance.

   • Learn from the experience: Take this crash as a lesson. Every market downturn is an opportunity to improve your risk management and emotional control for the future. Read up on strategies and learn how to protect yourself from similar situations in the future.

Staying Prepared for the Future

The market is unpredictable, and crashes happen. But how you react in these moments can determine whether you survive and come out ahead. By accepting uncertainty, managing your emotions, and managing risk, you can weather the storm and come out stronger.

Bitcoin and the stock market might seem like they’re falling apart right now, but remember: the market will recover. The key is to stay calm, stick to your strategy, and never let fear take control.

So, as we head into Monday’s market open, take a deep breath, stay grounded, and remember: you can’t lose if you didn’t lose money.

That’s all for today’s update. Keep managing your risk, and we’ll keep an eye on how things unfold!

Meme of the day

Thanks for reading,

Ahmed