Lessons from the Pros


Expect The Unexpected

Last week I was on a motorcycle tour of the Alps for my birthday. I am an experienced rider with many miles and yes, a few crashes under my belt. While riding in Northern Italy, I was struck by an angry driver who in a fit of road rage, decided to use his vehicle as a weapon against my motorcycle.

After sliding across the roadway, narrowly missing oncoming traffic, I came to rest safely against a tree on the grassy shoulder of the road. I escaped the incident with multiple bruises and some minor cuts. I am still in pain, but feeling fortunate to be alive.

On my flight home to the US, I reflected on the incident and how it was eerily similar to what many traders and investors experienced financially in their accounts during the 2000 tech bubble and also the 2008 financial crisis. Many were blindsided by an event that was out of their control and suffered for it.

The reason I was able to walk away from my accident relatively unscathed is because I was prepared. There is a saying in motorcycling, “Don’t dress for the ride, dress for the crash.” I was wearing full safety gear that took the brunt of the trauma. Additionally, I have previously taken motorcycle safety courses that prepared me for such an incident. When I was struck, my training kicked in and I was safely able to protect my body during the fall.

For traders and investors, this training is extremely important to their financial well being. The question is not whether there will be another market crash. The real question is are you ready for WHEN the next market crash comes.

The market crashes in 2000 and 2008 were predictable and profitable if you knew what to look for. One of my fellow instructors and traders, Merlin Rothfeld was interviewed in Late 2007 on CNBC and said, “Break out the bulldozers, this market is going down in a big way.”

Those traders with the proper training and education were prepared for a crash and were able to not only protect their capital but even profit in the bearish environment! The key thing is that you need to know how to identify the signs of danger and of course have a plan on how to protect your money and take advantage of the new environment. A bear market doesn’t have to be scary; in fact it could be a welcome event for opportunists.

As I write this article, the markets are experiencing a large two day drop and the Dow has been down for 10 of the last 14 sessions. This may be the summer doldrums or it could be the start of something more. The markets have been very choppy and economic data is starting to turn weaker and weaker. As traders and investors, we must be prepared through proper education for whatever the markets may throw at us.

Proper training saved my life last week. I hope you have the proper training to financially survive the unexpected events in the markets.

DISCLAIMER This newsletter is written for educational purposes only. By no means do any of its contents recommend, advocate or urge the buying, selling or holding of any financial instrument whatsoever. Trading and Investing involves high levels of risk. The author expresses personal opinions and will not assume any responsibility whatsoever for the actions of the reader. The author may or may not have positions in Financial Instruments discussed in this newsletter. Future results can be dramatically different from the opinions expressed herein. Past performance does not guarantee future results. Reprints allowed for private reading only, for all else, please obtain permission.

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