Is the stock market crashing? Are you going to lose all your money in the stock market?
2022 has definitely proved to be a very
uncertain year so far. This is the worst January I've ever seen in the stock market.
At the lows this year near the end of January, the S&P 500 was down 11%, the Nasdaq 16%.
Adding on to that, the uncertainty with interest rate hikes for the rest of the year,
high inflation, supply chain disruptions as a result of the pandemic, and potential global war
looming in the distance… This is definitely shaping up to be a very uncertain year
And you know what the number one thing the stock market hates the most,
uncertainty along with fear and panic.
The stock market looks weak right now,
and maybe you are wondering if you are going to lose your retirement, your house,
or your Lamborghini…well , I’ll never have to worry about that, because eh… I don't have one.
In this video, we are going to discuss is the stock market going to crash?
How exactly can traders and investors like you and I protect our money during this
down term, and most importantly HOW TO profit in a bear market.
This is going to be a very crucial video. Because yes while it was very
easy to make money during a crazy bullish hot market like we had in 2020 and 2021….
unfortunately most people are likely to lose them all in 2022
So… don’t be that person. Remember to smash the like button to turn on the
money-printing machine… because we could all use some of that free money right now.
2022 has been a down trend year so far. This is the worst January I’ve ever seen in the
stock market. We are finally seeing a small rebound now at the end of feb.
In comparison to January 2022, the worse performance in the stock market in the last
20 years was Oct and Nov 2008 with a 38% drop, followed by
March 2020 when the COVID pandemic was at its worst, 30% decline.
This kind of start to 2022, it has us all thinking, is this going to get a lot
worse? Most of the traders and investors actively participating in the market today
have never seen a bear market.
I think it's time we take a quick walk down the memory lane. Here’s a quick
look at the history of stock market crashes.
First, there’s of the infamous Black Monday of 1987 market crash.
that represented the greatest one-day percentage decline in U.S. stock market history.
Next there's the dot com bubble of 2000. When overvalued internet-based
companies finally went burst, they plummeted the index by 76% from 2001 until the end of 2002.
Many of the big tech names such as AMZN, AAPL,
MSFT survived… but you can't say the same for speculative names like…
pets dot com [Ad.]
Fast forward just 8 years later, we have the financial crisis of 2008.
Overleveraged housing market in the United States started collapsing when mortgage default rates
started rising and many unqualified home buyers weren’t able to make the payments.
The financial crisis led by subprime mortgage loans
were the true events in which the movie The Big Short was based on. By the way,
if you didn’t know already that’s one of my favorite movies of all time.
[Big Short Scene.]
During the 2008 financial crisis,
the stock market sold off and did not find a bottom until early 2009.
By then the market has dropped 50% from the peak. And it took 4 full years of the market to recover.
It's quite amazing that this even though this was only more than 10 years ago.
The reminiscence of the financial crisis is still very much fresh for many people today.
Then finally we have the crash of 2020, just 2 years ago. This one should be
fresh on everyone's minds. As the pandemic spread world wide, disrupting global trades,
travel and many people lost their jobs and were forced to quarantine at home.
The market sold off 30% starting in February all the way to mid-March.
However, unlike the prior stock market crashes we just talked about,
the most recent crash in 2020 recovered extremely quickly.
With the federal reserve slashing interest rates back to 0%,
and Jerome Powell bringing in the infinite money printing machine,
we saw stocks back at previous all-time highs in a matter of 2 or 3 months.
Which led many traders and investors to wonder,
did the FED just really postponed the market decline that was supposed to happen? Was the
stimulus really just a band aid trying to cover the surface of the problem,
and we are now potentially dealing with the consequences just two years later?
Due to the excessive stimulus injected into the economy, the rate of inflation right now
is running at 7% in the US, which is the largest year-over-year increase since 1982. In order to
combat that the FED signaled that they will slowly increase interest rates for the rest of 2022.
And the market is currently pricing in at least 3 interest rate hikes.
And according to the greatest investor of all time, the oracle of Omaha,
“Interest rates are like gravity in valuations. If interest rates are nothing, values can be
almost infinite. If interest rates are extremely high, that's a huge gravitational pull-on values.”
And on top of rising interest rate worries,
there’s a fear of a war with Russia potentially invading Ukraine,
the rising oil prices at a seven-year high. And historically speaking anytime oil prices spiked up
sharply, it is preceding a major recession. That was true in 1990, 1999 and 2008.
With all this uncertainty, how exactly should we, investors or traders protect ourselves from a
looming stock market crashing? Because sure, it's easy to say buy f* dip, and put it on a t-shirt.
But what happens when the dips just keep on dipping? How do we make sure who doesn't lose
money, but actually profit from this market crash instead? I think to answer this serious question,
first of all you have to think about whether you are a trader or an investor first.
For traders, whether you are swing trading or day trading like I am,
the most important practice to follow in the current volatile market is risk management.
Yes, I know that this topic does not sound fun or sexy, but it's the truth. Many people threw
Risk management out of the window in 2021, but you certainly cannot survive this year doing the same.
Because ultimately, nobody knows exactly when is the market going to crash.
While Michael burry had enough liquidity to hold through the pain for 2-3 years,
you and I the traders with our little accounts probably will get a phone call first.
No, not the sort of phone call you want for when waiting for your date calling you back.
I’m talking about Margin call.
And to avoid that call, whether you are a long biased or short biased trader,
the most important thing to follow is risk management and predetermining your stops.
If you’re long biased, use key support areas to risk off when buying the dip,
and cut your risk tight if a support breaks down with the market downturn. And very important
to know if you’re long biased, breakout success rates are extremely low right now.
So that's why rather than buying momentum breakouts, I’d recommend
longing support confirmations instead. Trust me,
just changing this one trade entry strategy will save you a lot of headaches this year.
On the other hand, if you are short biased, sure on the surface of the current outlook, market
looks very weak right now, we all know that.
It seems like it would be very easy to print money every day just shorting stocks, right?
You just click short, and Amazon will just deliver a Lambo to your door, right? Wrong.
Just a few weeks ago when the market was all doom and gloom, the Nasdaq dropping off a cliff. AMD
close to $100, TSLA sub $800s, and MRNA stock at $150. Where it deserves to be and much lower.
I f*$%king hate that stock. Not only did it mess up my trading account, but
their vaccine also put me in bed for the entire weekend.
Sorry I got too passionate about my all-time biggest loss in 2021 there.
Anyways, just as the market was piled on by short-sellers and sky high put option activities,
the market actually rallied. And that bounce was gnarly to say the least.
Shorting the market looks easy until your faces got ripped of.
The best course of action is, to have an actual trading plan. That consists of short entries,
look for potential profit targets and know your risk area. So, whether it’s a profit,
a loss or even breakeven, everything is calculated before you enter the trade.
If you don't know the answer of where stop out or take profit, I hate to break it to you,
that means you don't have a trade.
Again, I must emphasize that this is the simplest trading plan you can do as a trader, yet
90% of people don't do this. If you want to learn more about trade planning and risk management,
I go over that in detail in the Humbled Trader Academy. You can find the link to that below.
As a day trader this kind of market volatility has been amazing.
Because it provides us a lot of range both to the upside or the downside.
This is truly a trader’s market, where risk and planning matters above all.
And if you can follow the tips above,
while long term investors are crying about their year-to-date performance,
this is the market for traders to shine and still make profit from the short-term volatility.
Now if you’re an investor, not a trader, you should be investing in quality companies that
you truly believe in for the long-term growth. I would first evaluate whether these investments are
high quality and fundamentally sound. And if they are, what you should do with your investments is…
Absolutely nothing.
Even though we know the market is pricing in economic downturns ahead, and growth stocks
are in the toilet, investors need to remember that time in the market beats timing the market.
And my stance is, instead of trying to sell long term investments now and thinking to re-buy later,
investors should keep some dry powder on the side and buy the dip on your favorite stocks,
as there are many discounts coming up soon.
Warren buffet said to be fearful when others are greedy and be greedy when others are fearful.
…And right now, fear and panic in the market is definitely increasing every single day.
Investors don’t let a short-term price drop spook you out of quality long-term investments. unless
the fundamentals of the companies you’re invested have changed, there is no reason to panic sell.
Hopefully you find the tips in this video helpful for trader or investors. If you enjoyed the video,
please remember to drop a like at the bottom of the video. Thank you, guys,
so much for watching, I’m the humbled trader. I will see you guys next time.
you