Last Update: July 2021

Last week I addressed how to invest with stocks at all-time highs. The conversation focused on longer-term investors’ leery of putting new money to work with the market seemingly skirting the stratosphere. Today I want to pivot the discussion toward active traders.

What adjustments need to be made to your trading strategies with a market perched at all-time highs?

None. Nada. Zip. Zilch.

Class dismissed!

Okay, okay, I’ll elaborate. If you have a trading strategy proven to deliver dollars to your doorstep over time, then simply keep on keepin’ on. For example, say I sell monthly Iron Condors on the S&P 500 or the Russell 2000 Index. Should I adjust the course simply because the market has risen a lot?

No. I simply follow my rules fleshed out oh-so-meticulously in my plan.

Here’s another one. Say I sell naked puts each month on an ETF like SPY, IWM, EEM, or SLV. If my rules dictate I sell a 15 delta put every month provided the underlying is in an uptrend, then I do it. Period.

Last one. Say I’m a stock trader looking for retracement and breakout setups. And this week I followed the stock report by shorting CE and buying XL. Given the solid patterns in both cases and accompanying stop loss if they fail, why would I need to do anything differently?

I wouldn’t.

If the market suddenly reverses into a downtrend, who cares? You’ll get stopped out of your bullish plays while your bearish trades thrive. Bullish patterns will begin drying up while bearish patterns multiply. At the same time, the number of long ideas in our weekly reports will diminish while short ideas grow.

It’s a travesty that fear keeps people from participating. Do yourself a favor and stop worrying when the markets rise to new highs. Instead, learn how to profit from it.

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