Happy Friday, Evolvers!

Wow, what a difference a week makes!

Last week, the markets were choppy and unpredictable, making it difficult to find actionable setups.

But this week, the markets turned over a new leaf as every dip was bought and the S&P 500 ETF Trust (NYSEARCA: SPY) gained more than 3.3% in four trading days.

Is this the start of a new bull market? It’s too early to tell…

On the one hand, a new calendar year can reinvigorate the markets. We can’t forget how bad 2022 truly was for stocks, and negative years for the major indexes are usually followed by positive ones.

Perhaps this bullish momentum is giving us a small taste of what’s in store for the rest of 2023.

On the other hand, there are still plenty of reasons to be bearish…

We’re yet to fully understand the ripple effects of higher interest rates on corporate earnings, tech companies continue to increase the pace of layoffs, and the U.S. government just hit its debt ceiling. 

All this to say, don’t try to make any heroic long-term predictions in this market. Now is the time to wait for a major catalyst or big technical break in the charts. And I think one of these two things is likely to happen very soon…

But in the meantime, it’s time for our Friday Q&A! Let’s answer your questions…

“My five-figure account is down nearly 50% in two weeks trading options. How can I reverse my downswing?”

First, let me say that I know how you’re feeling right now.

Every trader goes through rough patches at one point or another, that part is unavoidable.

The important part is how you react to your losses.

I find that I learn more from my losses than my wins. This comes down to how our brains work…

When we succeed, we tend to think we did everything exactly right and that the win is entirely due to our own personal genius.

It’s only when we fail that we start to consider how we could improve. Sound familiar?

Now, let’s get down to the details…

I don’t know the exact trades you’ve been making, but I have a strong feeling that you’re trading with too much size.

If you have a five-figure account, there’s no reason to risk more than 5-10% of your account on each trade.

This is especially true for options traders because the value of your contracts can increase much faster than common shares.

In other words, you don’t need to risk large portions of your account to potentially grow it at a rapid speed.

It’s much better to be patient, size down, and build consistency.

Take these three steps and I bet you’ll find that your performance improves drastically.

“Some recent stressful life events have made it difficult for me to focus on trading. How do you keep your focus when life is distracting you from the markets?”

We’ve all been there… 

Normal life can be stressful and form a big distraction to your trading. 

This is doubly hard to deal with, and here’s why…

The stock market has a mind of its own and waits for no one … But your life events certainly won’t pause just because of the markets. 

If you plan on being an active trader, sooner or later, something in your life will create challenges for your normal trading routine.

So what’s a trader to do during these stressful times?

First, remember that some things are more important than trading. 

If you have a serious family emergency, for example, there’s no shame in completely disconnecting from the markets for a short period. 

The markets will always be there, but certain real-life issues require immediate attention. Don’t forget what’s truly important.

For example, my son recently came down with the flu. I traded much less that week because caring for my children is far more important to me than making trades.

Then, when you come back to trading, take things slow. Don’t rush back in with full size.

Get your bearings back by making a few very small trades at first before going full-bore into your normal trading strategy.

Lastly, I hope your stress eases soon and you get back to trading like a pro!

Final Thoughts

Have a great weekend, Evolvers!

Let’s see if next week can continue the positive momentum that the markets are building right now.

Now, go get some fresh air and I’ll talk to you on Monday!