The Fog of Markets & War: We Trade Like Mike Tyson Fights

On Saturday, Iran launched an unprecedented attack against Israel.

It seemed like a well-planned operation. Suicide drones, ballistic missiles and cruise missiles were launched from several locations. The plan was most likely an attempt to overwhelm Israel’s air defense systems … and it failed.

Israel and its allies prevented 99% of the drones and missiles from reaching their targets.

This kind of outcome is fairly typical in military actions.

More than 150 years ago, Prussian Field Marshal Helmuth von Moltke wrote: “No plan of operations extends with any certainty beyond the first encounter with the main enemy forces.”

Mike Tyson explained the concept in simpler terms when he said: “Everyone has a plan until they get punched in the mouth.”

Iran’s weapons were punched in the mouth by an Israeli-led coalition of forces. With that, the fog of war, which perpetually hangs over the Middle East, thickened.

“The fog of war” is associated with another Prussian Major, General Carl von Clausewitz, who explained: “War is the realm of uncertainty; three quarters of the factors on which action in war is based are wrapped in a fog of greater or lesser uncertainty.”

Military leaders around the world understand these principles. That’s why they train their troops. Once the shooting starts, they expect their troops (the individuals facing fire) to adapt to what they see in real time.

There’s an important lesson here for investors — but it’s not the obvious one…

How to Battle the Fog of Markets

Many investors think of a market selloff as the fog of war.

They hold fast, believing that’s what they need to do. After all, they know stock prices always come back. And besides, they bought quality companies.

So, what could go wrong?

Well, everything.

You see, stock prices don’t always come back.

Many of you are old enough to remember Enron. That one-time high-flier never came back because the company went into bankruptcy.

As it was flying high, almost everyone believed Enron was a quality company. Its earnings were growing. Management said all the right things. Yet few investors understood the company was a fraud.

Enron is a memorable example. But there are many other stocks that never came back. That includes high-quality companies that were, in fact, far from being frauds.

Yahoo stopped trading in 2017 more than 50% below its all-time high. Sears went bankrupt in 2018 after falling 99% from its 2007 high. And Bear Stearns fell from more than $170 to less than $10 in the 2008 financial crisis.

Instead of digging in, investors need to react to the changing environment.

In other words, we need to think like Mike Tyson instead of pretending we’re Warren Buffett.

Tyson adapts to what he sees in the ring. If he’s getting hit by hard rights, he protects his left side. If he finds his opponent leaves his left open, he throws more rights.

This might differ from what Tyson expected. But that doesn’t matter. Tyson’s goal is to win. Sticking to the same plan won’t help him beat adversity.

This is the lesson investors need to carry them through the fog of the markets.

One way to adapt to the market environment is to know when you’ll sell.

Investors in Enron, Yahoo, Sears, Bear Stearns (and every other delisted stock) had many opportunities to exit with smaller losses. Unfortunately, too many stubbornly held on to the bitter end.

Another way to survive (and profit) through the uncertainty of the market is to trade short-term strategies that adapt to the market action.

Adapt, Win, Repeat

My Precision Profits subscribers trade like Mike Tyson. We’re adapting to the market action every day — just like Tyson adapts to every round.

One of our trading strategies — the Opening Range Breakout (ORB) — holds positions for just two hours … or less. And it’s had a pretty active month.

In the first half of April, we’ve locked in 13 trades. Eight of them were winners, and five of those were for a 50% gain or more.

So far this month, a $1,000 allocation to the strategy would have generated $593 in profit. This comes at a time when the S&P 500 is down 3.5%.

Better yet, ORB is designed to excel when stocks are volatile.

It’s a strategy every investor should consider as we move into a time when global events — like warfare attacks — might increase the risks of a buy-and-hold strategy.

Of course, ORB is just one of my favorite battle-tested tools for growing profits.

I’m constantly looking for a new edge to help my readers make additional money in any type of market.

That’s why I’m about to open access to my income strategy … one that I’ve spent the last couple of decades refining to achieve stunning results.

I’ll even be using my own $30,000 account to target $78,000 with this strategy over the next year, to show just how confident I am about this system’s performance.

I’ll be sharing the full details of how you start using it with me next week. So remember to grab your free spot to my Accelerate Income Summit” — on April 25 at 1 p.m. ET — right here.

Regards,

Michael Carr's Signature
Michael Carr
Editor, Precision Profits

Write a Comment

Your email address will not be published.