These days, it seems like the beginning of every trading week begins with tension and anxiety.
It’s doom and gloom on financial news networks all the time, painting a bleak picture for investors. Good thing we’re not investors — we’re traders.
There’s an old saying that ‘fortunes are made in bear markets.’ As the kids say, facts.
If you look for the bear market trading opportunities — as opposed to just dropping money into an index fund — you can potentially make that old saying a reality.
Who am I to say? Oh, I’m just the guy who turned under $50,000 into $200,000+ on ProShares Bitcoin Strategy ETF (NYSEARCA: BITO) puts last week.
Is it easy to find five-star setups in a historic bear market? Heck no.
But those rare discoveries can come with massive rewards. Let me show you how to find them…
Step #1: Keep a Big-Picture View
Even when you’re trying to find sector-specific setups, you must keep tabs on what’s going on with the major indexes.
In a raging bull market, you don’t have to worry about this as much. But in a nasty correction — like the one we’re in the middle of — you’ve gotta keep a pulse on the overall markets.
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This is how I nailed the BITO play last week. I felt the inflation numbers were so bad as to potentially send crypto off a cliff. I was right.
Having a big-picture view doesn’t need to be complicated. For example, going into this week, I think about it like this…
Nine out of the last ten weeks have been red for the major indexes, with last week being the worst since the start of the pandemic.
But as I’m writing this, S&P 500 futures have bounced more than 1% heading out of the long weekend.
This makes me think I should avoid being overly bearish at the start of the week. Sometimes the worst weeks, like last week, are followed by violent bounces to the upside.
Step #2: Watch for Clear Breaks of Support and Resistance Levels
A huge part of my trading comes down to identifying key price levels and pulling the trigger when stocks break them in either direction.
And to find key price levels, you’ve gotta look at daily and weekly charts. This is where long-term support and resistance are clearly visible.
With a bit of experience, it’s impossible not to see these levels. They stick out like a sore thumb.
As I was doing some analysis on the Bitcoin (BTC) chart last week, it became clear that the $30,000 handle was the support to watch.
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When that level broke on Friday, I was ready to go. And I made nearly a quarter of a million dollars trading BITO puts because of it.
All this to say … keep an eye on the crucial price levels. Pull up the long-term charts and mark them. That way, you’ll be ready to go like I was.
Step #3: Book Profits Quickly
If you’re lucky and disciplined enough to find yourself in a trade like my BITO play, where your contracts are surging, it’s time to immediately identify another price target — the level where you’ll book profits.
You’ve heard me say that you should always cut losses quickly. This is always true.
But the concept works on the other side of the coin as well — when it comes to booking profits quickly.
I learned both of these things from my mentor, Tim Sykes. And right now, you’ve got a crazy opportunity to soak up Sykes’ knowledge, just like I did. He’s figured out a new approach to the market that’s delivering as much as 321% in a single trade. Check it out here!
If a trade’s going well, greed is your worst enemy. You’ve gotta fight the urge to hold out for unrealistic price targets.
Pick a nearby round number. When the share price nears this level, sell your contracts no matter what.
When traders come to options from the world of common shares, the volatility can be overwhelming.
Setting a hard profit-taking target can help this. And if you play it right, you can potentially make a fortune.
Winning in a losing market is what separates sharply-skilled traders from by-the-numbers investors.
Sure, if you hold index funds long enough, you’ll make money. That said, if you’re reading this, you’ve already shown interest in a higher-risk/higher-reward strategy. And you should.
There are diamonds in the rough out there in this market, five-star setups just waiting to be discovered.
It’s not easy. I spent the whole first half of this year sitting on my hands. But once I followed the steps above and applied them to my trading in a focused way … I bagged my biggest trade of all time.