We have enjoyed a really nice 5 weeks so far where we literally had 100% winners every week. But to expect this to continue in the future is unrealistic. Although this rally has some serious legs, we will soon start getting into a phase where things will normalize. i.e we will have some winners and some losers in each expiration. This famous quote from Peter Lynch comes to mind – “In this business, if you’re good, you’re right six times out of ten. You’re never going to be right nine times out of ten” This is the point where discipline will come back into play and here are some key points to keep in mind:

1. Drop allocations and market exposure while continuing to benefit from this rally. 15% – 25% is a perfectly fine allocation as it is high enough to make decent gains from this rally. But it is still a safe place to be if we get a pullback.
2. Don’t keep allocations too low. Anything below 15% will make your account stagnant. You will see everybody around you high fiving their victories and you will eventually end up FOMOing into trades at the worst possible time. It is important to keep a decent allocation so you keep making gains when markets are rallying.
3. As we go into a phase where we will have a mix of winners and losers, sticking to the 50% loss rule becomes important again. By closing losers at 50% loss, you can wipe out 2 losers with 1 winning trade.

THIS IS A DELAYED TRADE FOR EDUCATIONAL PURPOSES ONLY.

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