US and China Agree on a Temporary Tariff Deal

How to stop from loosing all of your money

A productive weekend concluded with progress in US-China tariff negotiations. Markets are rallying substantially in pre-market trading, with The XII set to open higher across the board, fueled by rising S&P 500 futures.

Depending on where the equity portion of the portfolio closes, we could see much of The XII close above their intermediate trend lines, triggering an increase in allocation. This is significant—something I've been watching for since starting The XII. What's concerning is that nothing fundamental has changed: existing economic data continues to deteriorate, consumers remain under pressure, and corporations continue to guide lower or offer no guidance at all.

I believe that during events like this—headline-driven news—is when you need to become most cautious. Do you sit on the sidelines? Not necessarily, but you must maintain a robust risk management program.

Over the weekend, I analyzed what it would take to draw down a $10,000 account to zero if you allocated 12 stocks at 8% of capital each, using different stop-loss levels. Below is a chart showing the number of trades required:

By simply implementing a 7% to 10% trailing stop loss after your initial purchase, it would take between 1,600 and 2,400 trades to completely deplete an account where you've allocated 8% of a $10,000 portfolio to 12 stocks and reinvested the proceeds after stop-outs. This is compared to allowing a stock to decline 60% and getting stopped out would only take 204 trades.

I often hear comments like "that's swing trading" or "that's day trading—I'm more of a long-term investor." The truth is, everyone is a long-term investor. The number one key for any type of investor is capital preservation. Once you've lost all your capital, you can no longer participate in the market. You lose your chance at turning dreams into reality.

Build a solid risk management process that removes emotions from investing—emotions are what often defeat most investors.

Live Loud!

Trent