Don’t Fall Prey To Emotional Craziness


Simpler Trading Team

Nov 09th 2020  .  3 min read

Monday was a major gap up event in the stock market that many credit to news of a Covid-19 vaccine and the proclamation of presidential election results.

But it wasn’t rosy across the board.

While the Dow closed at 29,157.97 points to jump 2.95% (gaining 834.5 points on the day after soaring as high as 1,200 points), the Nasdaq dropped to 11,713.78 points for a 1.53% tumble. Much of the Nasdaq downturn was due to losses in stocks that benefited from pandemic conditions.

The S&P 500 bookended the day by jumping 1.17% to 3,550.50 points.

Is this an emotion-driven, single-day event or a turn in the market for the long run?

Simpler’s traders are watching how the day rolls into tomorrow considering that any vaccine hasn’t been approved or distributed and election results face legal challenges aplenty.

The consensus is to stay light in trades and wait out Monday’s emotional movement. As in any market, there are trades to be had but caution is warranted. Know that you must be willing to risk the investment in any trade.

With trade options throughout this extreme movement in the market, traders would do well to consider how any of them fit into their trading plan. No one trader can take advantage of all opportunities in the market – managing a handful of trades can be, well, a handful.

Prudent traders know it’s OK to miss most market opportunities while sticking to a personalized trading plan. When the market gets crazy, trying to chase every possibility can drive a trader crazy.

It makes sense to avoid the distraction of “What did I miss?”

This skyrocketing market phase is a chance to solidify which trades to target that fit a pre-established trading style and plan. This can create confidence that no matter how the market is moving any trades taken are following a defined plan regardless of market volatility.

Confidence can lead to more successful trades with the intention of keeping the trading account safe.

Best to leave emotional responses to traders on the wrong side of the next “charged up” market move.

We Saw: Soaring stock market sectors – 

  • Market reacts positive to vaccine, election news
  • Dow spikes to 1,200 at one point in Monday session
  • Travel heats up, pandemic stocks cool off

We’re Watching: If emotion-based surge holds or gaps to the downside –

  • Keeping light levels of trades, if not all cash
  • Still lots of uncertainty with vaccine, election results
  • For a pullback to gauge any further upswing