Risk Management Is Important
Ignore that mantra at your peril. From the highs to the lows on Tuesday, the S&P 500 sold off 40 points and broke its key trend line. That’s a massive swing considering how low volatility has been and how small point moves tend to be on a day-to-day basis. But you can’t ignore risk and when the market sells off, it will do exactly what it did on Tuesday — plunge.
The selling may or may not be over, but I’m 100% cash. Tuesday’s moves took me out of my stops and I booked some profits. I’m okay, though, because I’ve been increasing my stop-losses just in case.
That means that flexibility is in my corner and I can ride this market in whichever direction it moves.