‘Counting’ Cash To Limit Risk In Wild Market


Simpler Trading Team

Jun 14th 2021  .  2 min read

Sometimes traders need to stick with the fundamentals, and in this market that wants to run wild the old “cash is king” strategy helps keep accounts stable any way the market moves.

Traders holding cash won’t be risking it in the market.

The market and investors are facing a variety of challenges…. investors are cautious of Fed action or lack of action; banks and Wall Street heavyweights are growing fearful of inflation; and the basics of finding sound companies where leadership doesn’t suddenly resign is a daily task.

The three major indexes were mixed today with all these above factors weighing into the session’s outcome into the close. The Nasdaq kept up its press toward new highs while the S&P 500 eked out a positive close and the Dow struggled all day and closed just under flat.

While not necessarily a long-term trading strategy, staying in cash until the market presents an opportunity aligning with your plans and comfort level helps manage risk in the near term.

When in cash, you simply won’t be on the wrong side of the market when the bottom falls out or there is an emotional race to all-time highs. This is the simplest hedge position to take for traders of any skill level.

Simpler’s traders are watching and waiting – taking trades along the way – while the market decides which direction to lean into this week.

For the Simpler team this is a time to cut loose any trades not doing their job; focus on quick, small wins that boost the account; and not getting caught jumping onto the emotional rollercoaster of this market.

We Saw: Surging expectations of higher inflation ahead –

  • Rebellious workforce wants to remain remote
  • Nasdaq, S&P 500 rally higher to records
  • Cryptocurrency once again gaining favor

We’re Watching: Opportunistic moves fueled by inflation fears –

  • Our cash to hedge against getting caught on wrong side of moves
  • Tickers still sitting under their 52-week highs
  • Setups in: WOOF, AVGO, PLBY