It finally happened…
After a few intense weeks, the GameStop frenzy seems to be winding down.
To be honest, it feels like this situation has set a new order in the markets.
Things can change quickly nowadays…
But right now, the best thing we can do is learn from what happened and prepare for what’s next.
- Know who you’re trading alongside.
This is something most traders have probably never given much consideration.
But it’s definitely a factor to consider these days.
Knowing who is trading the same ticker you are matters.
Why?
Because a passionate group of traders can have an impact on price… just like the WallStreetBets boys did on GME.
Which brings us to number 2…
- Choose your broker wisely.
Many traders learned this lesson the hard way with Robinhood.
Choosing the right broker is now more important than ever.
So what kind of broker should you pick?
I’d recommend one that caters to active traders.
These offer more control, access to better short inventory, better platforms, and a host of other benefits that can make or break traders during periods of market volatility.
Speaking of volatility…
- Expect the unexpected.
I think the real lesson from this situation is:
Anything can happen, so keep your eyes and ears wide open!
There are forces clashing behind the scenes every day that we don’t know about.
New regulations can be passed at any moment changing the way the game is played.
So stay alert and be wary of where you put your money.
- Never underestimate a move.
Cold reality spoiler:
The market doesn’t care what you think.
A stock is never up or down “too much.”
Remember that the market is not completely “rational” and that price moves don’t always align with fundamental analysis.
Don’t fight the trend — instead, make sure you’re on the right side of it.
- Cut losses quickly.
This lesson is sponsored by the billion-dollar Wall Street hedge funds.
Cutting losses quickly is one of the most fundamental lessons traders learn early on.
Never risk so much that it can put you out of the game if you lose.
In the same way, you should strive to…
- Lock in gains along the way.
Buying and holding is not a strategy that works on volatile momentum stocks.
That’s something that many Reddit traders didn’t think about (or just didn’t know).
The reality is most of them could have sold their shares and made huge gains while the price was upward of $400.
But they decided to hold in order to keep raising the price.
Clearly, they didn’t consider number 7 on our list…
- What goes up must go down.
Parabolic moves are subject to the laws of gravity – what goes up must come down.
Huge moves (especially those with no fundamental basis, a la GameStop) are unsustainable.
Hype inevitably dies down and the market moves on to the next big thing. We see this in every market.
So remember to cash in along the way!
Hopefully, these quick tips can help you survive and thrive in whatever market conditions are coming our way.
Very rarely do we get so many lessons from just one trade.
But GameStop was a true phenomenon that will be talked about and studied for years.
I don’t know when something similar will happen again…
But I do know where you can find more lessons to improve your trading skills.
If you click the link above you’ll go to a free masterclass where I teach you how I became a full-time trader…
Including the exact tools and methodology I use…
And how you can double your account in 36 days trading low-risk setups.
Check out the free training, and have a great weekend!
