We’ve been expecting a drop after the bonus for a while now.
Some said it wouldn’t happen, but it clearly is happening and it is causing some stress.
In context of the rises we have seen though, it feels pretty damn mild to me so far.
However, that may well change when Football Index turn Instant Sell back on and we may need to mentally prepare for things to get worse before they get better.
All feels a bit stressful right? That’s normal and even the most relaxed traders will not find it fun seeing their portfolio drop. I am a fairly low blood pressure kind of guy but it’s not like I sit here doing yoga with my emotions totally in check.
But, it’s whether you can deal with that and not let any of those feelings push you into rash decisions that will tell you if you are a good trader or not. Not just for today either.
Eventually the Index will become a much tougher place to profit and losing money will get a whole lot easier. Day’s like today you can find out whether you will cut it in tougher times.
But I would not stress too much. It is very likely things will get better. And relatively quickly. The new season is just around the corner and in my years on FI I have rarely seen optimism so high.
Managing Risk
By now, when the market is dropping, there really aren’t that many good moves to make if you aren’t happy with what you have.
Navigating these periods strongly is all about preparation.
The golden rule (that so many people break) is that if you need the money back immediately and you can’t really afford it, it shouldn’t be in there. You have pushed yourself into a weak position where you are desperate to sell at the moment when nobody is buying. It’s hard to make good decisions from there.
If you wanted to sell then the best time to do it was last night whilst the market was doing it’s last minute pumping.
To manage risk whilst keeping your bonus in you could have shifted your money from hyped/highly priced players who have benefited from the bonus rush to more understated quality players who haven’t been pumped yet. If a player isn’t stuffed with bonus cash, they are much less likely to drop when bonus cash comes out.
The best place to be right now is holding quality players at value prices that will be in demand for the new season having offloaded any weak/hyped/overpriced assets.
You can then hold what you have a few weeks longer, likely catching the pre-season rush, and extracting your money at an optimal time (if you need to) when the market is likely to be rising as the new season approaches.
If those players get a drop in the next day or two, you should be confident enough in them to shrug that off.
What has been different about this particular bonus period though is that the money has gone to a much wider variety of targets than has been the case in the past. It’s actually really hard to dodge all of the drops and I can’t think of any portfolio type that will be totally immune from it.
The only protection is therefore to have the freedom to keep money in and sell when you want, and be confident in what you have.
If you can’t wait because you have over extended financially and need money back, it’s your own fault for putting yourself in that weak position.
What to do next?
Sometimes the best course of action is to do nothing, and from my position at least, that feels like the best thing right now.
I’m confident in my portfolio. I do my analysis. I know what the market trends are. I know what players are really worth. If my portfolio doesn’t make good money between now and the new season then it will be because of an unexpected event that I can’t do much about anyway other than my usual risk management.
I manage risk by not holding garbage hype picks or over valued players and if you are confident in FI as a platform going into the season, that’s enough.
I will not be looking at who is dropping in my portfolio today and then wondering if I should sell. I was doing that all week until I was satisfied I was very confident in what I had. It’s too late for that now. At some point I have to trust in my decisions and not worry about what others are doing too much.
I’ll be on the look out for good value if prices fall. Traders are probably as bored as I am of the cliché trading expressions like be greedy when others are fearful/fearful when other’s are greedy but they are classics for a reason.
I did not over extend for the bonus but do have some cash spare to inject if value does appear.
Mental Toughness
Days like today can be mentally hard. Especially for many traders who only ever really know growth. FI is an immature and extremely generous market and most traders are not particularly battle hardened.
I think anyone who says they are totally unaffected by drops might be over stating it.
But if you have the discipline not to let it push you into bad decisions you have good reason to believe you have a good mentality for trading, in tough times as well as when the market is flying.
I’ll be keeping the focus on the new season. Pre-season is not far away and members can look forward to my detailed scouting of the matches to see which of last season’s stars should continue or decline, and which new players look like breaking out. If you aren’t a member yet, check out what is on offer here. It’s a great time to join.
It’s where the market is in 30 days that matters most to me. Today may be rocky. But we knew this and should have been preparing for it for weeks. It would seem foolish to over react now it is here.