Day Trading in a Bear Market

This is going to start the week here by talking about how to trade through a bear market. I thought this would be a good way to kind of set the stage because obviously, if you look at the S&P 500, you can tell that we are in a bear market and traders frequently have been asking, you know, over the last few weeks , last few months, you know, how do you trade through a bear market?

Do you just go short? Do you trade? You know, what do you do? How do you make money? So if you’re looking at the S&P. 500 right here. And by the way, thank you guys who are tuning in for this special episode. I hope you guys really enjoy it. It will be recorded and saved so you can watch it later down the road.

So this is the S&P. 500 and since January, we’ve been on a pullback and we’ve pulled back substantially over 20%. This is a significant pullback in the market. The last several recessions were a drawdown of around 2420 5%. So you know we’re already in from how much the market has pulled back recession territory. But of course recession is not defined by the percentage of the market drops versus the high.

There’s different different criteria for an official recession and that’s an economic definition. So to set that aside, we’re in a bear market. And so we would define a bear market as a market where the overall momentum is to the downside, where we are going sideways. Certainly to the S&P. 500 being below the 200 moving average is indicative of being in a bear market.

And if you look to the IWM, which is a smock which is the Russell 2000 small cap index, this has been really beaten up. I mean, this is down substantially. And I can just change my timeframe here. Let’s see. So we’ll we’ll switch this to to 200 here so you can see that this has really gotten knocked down pretty badly.

And as many of you know, I focus on trading small caps. So this has been a difficult year so far to be a small cap trader. And so I thought today we could talk a little bit about how to trade through a bear market. And as I jump into it, I’m going to give you guys a couple of things that you can download and that you can review that will help you as you’re trading through a bear market or try and better understand how trade through choppy markets.

And I’ll share with you some of my metrics I want to remind you guys, as always, that my results are not typical. I share my metrics with you, not because I want you to assume that those results are typical or that you’re going to achieve a similar result or anything like that. But because I want you to know that the person that you’re learning from right here today in this episode is actually a profitable trader, actually knows what the heck you’re talking about.

So I do have my audited the audit of my broker statements right here. And you can see my broker statements on the website. But this shows over $9 million in profit started in January of 2017 with $583 in my account. So from $583 starting balance to over 9 million average monthly return, $159,000. And on this page right over here, I show a percentage return of about 1.6 million% on that small account.

All right. So if you want to learn more about the markets I think you’re learning from someone who certainly knows what they’re talking about and is verified profitable. So I would just encourage you when you’re getting your information out there, if it’s free information on YouTube or wherever it is, make sure you know the person you’re learning from is credible.

So let’s pull up my metrics for the the year so far. And this is going to help set the context for where we’re at. So January to May right here, we’re in mid-May, and I’m sitting right now gross profit on the year at about $475,000. Now, if we adjusted this and changed the date to 20, 21 just for comparison to do just year over year last year at this time I was at 1.8 million.

So you can see without a doubt that I made a lot more last year than this year. Now if we looked at 20, 20 the same period of time, you would see that I actually made a little bit less $355,000. So my profits for sure are driven by the type of market that we’re in. In a really hot market.

I can crush it in a colder market. I have to be more conservative. And the market was very cold in the first quarter of 20, 20 because that was when the pandemic was kind of kicking in and that’s when we were getting into this. You know, the market was having this big drop, as you can see right here, this was the first quarter of 20, 20 so things were really, really bearish and pretty scary and then they rebounded pretty hard.

But if you look at first quarter of 20, 21, we were in, you know a pretty solid bull market at that time. So a bull market stocks are at all time highs, they’re moving higher, they’re squeezing super momentum strong and it’s a rising tide that kind of lifts all ships. So whenever you’re trading in a bull market just seems to it just seems to be easier.

And if you’ve traded in both, you can attest to the fact that when the market’s hot it so much easier and when the market’s cold it feels like everything can be a bit of a struggle and it’s like, wow, this is really difficult to trade. OK, so let’s talk about how to actually trade through a bear market.

You can make money in a bear market. I have proven that I am making money in a bear market right now. The last just you know, the last two weeks the market has been you can see here, if we zoom into the S&P 500, it’s obviously been very weak. We’re below the 200 moving average. We’re selling off. So pretty much this whole month of May has been, you know, not great.

And my metrics for the month of May are solid. I’m at $73,000 in gross profit. 70% accuracy profit loss ratio $100 winner at $142 loser. So these are the metrics that are supporting the strategy that I’m trading. So what’s the strategy what’s what’s my focus on how I’m trading right now to trade through a bear market you have to be super focused on trading the highest quality stocks.

And so I am going to be trading less than I would trade in a bull market. There will not be as many opportunities, but there will still be opportunities. Well, just yesterday, Sega, Sega, this stock, you know, made a phenomenal move from $9 all the way up to 17. That’s a 100% move right there. So those are going to happen.

You’re going to see opportunities like that. And your job, if you’re a day trader and you’re trying to trade through a bear market, is to have the discipline to wait for a quality set ups. So let’s define what an air quality set up kind of looks like and we’ll jump over to the whiteboard here. So what I’m going to look for when I sit down each morning and I’m going to do this in real time for you as well as we kind of our breaking down the watch list.

But as I sit down each morning, I’m looking for stocks number one that are already up 10%. I want to see a stock up 10% because that already tells me it’s bucking the trend of the overall market. There’s only a small handful of stocks each day are going to be up that much. So let’s look at our scan right here.

In the entire market of thousands of stocks. If we focus on only stocks up over 10%, we’ve already narrowed it down to two, four, six, eight, ten 12 stocks 14 so from 5000 10,000 instruments that you could trade, we’ve already narrowed it down to ten. All right. We’re approximately 1015. Right. OK, now what are we going to do next?

We’re going to focus number two price between generally speaking, $2.20. Well, I sometimes trade a little higher maybe. Well, I sometimes trade a little lower maybe. But generally I’m going to focus on this price range. Why am I going to focus on that price range? That’s the price range that most retail traders are most excited about. And that means if traders are excited about it, you’re going to see a higher volume even in a bear market on those types of stocks.

And with that higher volume, you’re going to see better follow through. That’s we want to see high volume, better follow through. And that leads us to number three, relative volume of five times or up. All right. Now let’s look back over here. Relative volume. The relative volume on Cbio right now is 3875%. So that far exceeds the five times minimum.

In fact, all of these right now are exceeding the five times minimum, which makes sense because if they’re gapping up 10%, it’s because obvious something is happening. Traders have already gotten interested in it, and that interest is what generates the volume now, preferably we’re going to want to see number four, a news catalyst. This is important in a bear market because this is what’s going to drive the stock up.

This is the reason the stock is up 10%. This is the reason the stock has five times relative volume now. The reason the stock has the potential to go up plus 30 plus 50 or plus 100% will be because the price is popular and number five float under 20 million, preferably under ten. This would be preferred. All right. So now let’s look over at our scan again.

So if we’re looking at this scan here of these stocks, we can now rule out, generally speaking, cbio as an MP, VW, M or BMW. So now, now while we just focus on which of the top gaps here of more than 10% of a float of less than 20 million, we’ve got one, two, three and then this one has no float.

We’ve got to do a little more research to figure out what the float is. So we’ve now narrowed down our potential watch list to three stocks today. All right. Now it’s possible because it’s still early in the morning, it’s possible that another stock will pop up and that could very instantly come into play and be in focus it’s also possible that the most obvious stock today, let’s say let’s just say CPI now well to 31 million share floats a little higher than I typically would like.

And we could check out the chart and do a little due diligence on it. We see. Ah, well, it’s a little on the cheap side. It’s a dollar 95 and that’s not really my favorite price range. OK, so that’s, that’s not great. The float is a little higher so it was probably not going to go for it, but maybe,

And so it’s a possibility the second leading Gapper is got X, so this one’s up 37%, it’s got a pre market hype about two O8 but again it’s a little on the cheaper side, you know, but that’s OK, you know it’s because it’s the leading gap or because the floats 9.2 million shares that’s going to give it probably a little extra a little extra boost.

So that’s worth watching. But I’m not going to take a trade on it quite yet. You know, just kind of watching. So and it’s still, as I said, a little early. So your best bet for how to trade through a bear market and this is really it’s really simple. It’s to trade less. It’s to have the discipline to trade less, it’s to have the patience to wait for a quality setups.

If you can have the discipline and the patience, then you can get through a bear market. And this is something that’s kind of funny. So many traders come into the market when it’s high because, you know, whatever they they see sharing all the money they’re making, whether it’s on social media or it’s a friend or whatever it is.

And they’re like, Oh, man, everyone’s making money. I’m missing out. FOMO kicks in. So they come into the market when it’s really hot. And the problem is, you know, maybe if they start trading real money, and some of you have, you know, in a hot market, you’ll hit the ground running, you’ll have a little beginner’s luck, you’ll make some money, but you’re not real…

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