Bear Market Lessons From One Of The Market’s Greatest Traders

Investing can be frustrating. The psychological toll is sometimes just too much.

Many people remained on the sidelines during the great bull market because of the mental (and financial) toll of the 2008 market crisis was just too much to bear. It’s those same types of emotions that cause many of us to hold onto a losing position for far too long. We have difficulty cutting our losses, as we “hope” the stock will get back to our entry price so we can break even.

As a trader or investor, you’ll have days where everything seems to be going right in your portfolio. The euphoria makes you feel invincible. You’re up handsomely on a plethora of positions only to have those gains, and then some, washed away the next day for reasons you may not understand (such as a tweet from a President, or a pandemic breaking out across the world).

On the days when your portfolio is in the red, you wish you would have sold everything the day before. Watching gains evaporate can really take a toll emotionally (again, a big reason why many investors struggle to cut their losses).

You begin to question your strategy, your investment thesis, or why you even put money in the stock market in the first place. After all, had that money been sitting in a savings account, at least you’d still have your principle left.

If you’ve had any of these second thoughts, you’re not alone. All traders and investors endure those feelings at some point. Every successful investor out there has had to stomach massive drawdowns, tough days, and even going bust. Yet, they stuck with what they knew and (sometimes) learned from their mistakes, and went on to make fortunes.

Lessons From The Great Bear Of Wall Street

One such example is the notorious trader, Jesse Livermore, who made and lost fortunes in the market several times. In his first six months of trading on Wall Street, Jesse went bust. But he rebounded and turned $10,000 into $50,000, then turned that into $250,000, then into $3 million.

Then he went bankrupt trading cotton futures.

Jesse eventually traded his way back to profitability and amassed $100 million by shorting the market during the crash of 1929.

Livermore stuck to his strategy and what he knew. In fact, the trading principles that he established continue to be studied and used today. Jesse believed that prices were never too high to begin buying, or too low to begin selling. His investment approach relied heavily on trading with the trend, as well as paying attention to the behavioral and emotional aspects of trading. (If you’re a Maximum Profit subscriber, this no doubt sounds familiar.)

Key Takeaways

I’m sure that at times (especially when he lost his fortunes), Livermore questioned his strategy and approach to the market. Yet, it was that approach that made him the fortune in the first place. But the key to his success was finding a strategy that worked and then sticking to it… even during times when it seemed fruitless.

One of the most difficult parts about investing is staying disciplined and remaining patient. It’s easy to give up on a strategy or system after a string of losses. It’s frustrating. But that doesn’t mean the system is broken.

As for my subscribers and I, we are simply following the rules or the Maximum Profit system. We are cutting our losers short and letting our winners run. We are sitting on a handful of nice winners since the bottom of the market fell out earlier this year. I’m not going to lie, it was tough for a few weeks there. But we stuck with it, and now we’re cranking out winners once again. This is what happens when you stick to a proven, winning strategy.

One strategy that makes a lot of sense in this market is income stocks…

A lot of quality equities and funds that were driven down sharply due to the coronavirus pandemic. Many will still be around after this is all over. In the meantime, they’re left with sky-high payouts while prices are down. That gives investors a once-in-a-generation opportunity to find rare deals — and high yields they wouldn’t normally find.

If want to know about our absolute favorite high-yield picks, then check out our latest report right here.