2 things to help navigate the market this week

As I write this at 9:30 PM on the night of Monday, February 21, 2022, there are reports that Russia has started the much-anticipated invasion of Ukraine. Futures are down, likely a signal of a bumpy week ahead for the stock market.

I can’t tell you what a Russia/Ukraine war means for the global economy, oil markets, interest rates, Covid, or anything else. But I can watch the price action.

Even before the news of war, the markets weren’t looking great. The SP 500 and the NASDAQ 100 haven’t officially reached the 20% drawdown from highs that would classify them as entering a bear market. But there are many bear markets in individual stocks by other measures. Defense has been the name of the game.

As you watch the action tomorrow and the rest of the week, remember this:

• It’s ok to sell down to your sleeping level. If you’re worried, anxious, and losing sleep over a trade then;

  • a) you’ve got too much size,

  • b) you don’t trust your system, or

  • c) both.

It’s ok to close a trade. Your emotional capital needs to be preserved as much as your dollar capital. But make sure you use the information to refine and improve your system.

• Don’t say “I’ll get back in when things settle down.” That’s a lie. You won’t do it. How could you? What even is your definition of “settle down?” Take the time to define the scenario in which you’ll start taking long trades again. What EXACTLY do you want to see? What are the levels you’re watching? In the major indexes, interest rates, volatility? Whatever parameters are important to you, make sure you know the ideal situation.

Have a plan. Learn from your losses. Look for chances to improve your trading. And watch for the scenarios and opportunities that you’ve already mapped out. Then, if and when they materialize all you have to do is execute.

Good luck, trade smart, manage your risk.