“If you’re going to invest in stocks for the long term, or real estate, of course, there are going to be periods when there’s a lot of agony and other periods when there’s a boom. I think you just have to learn to live through them.”
— Charlie Munger
November 26, 2025 — The market’s been bleeding a lot of red recently…
But it doesn’t affect me one bit.
Why?
Because while “buy-and-hold” investors are watching their portfolios sink, refreshing their brokerage apps every five minutes, desperately praying for a massive bounce…
My students and I? We’re sitting in cash.
Calm. Prepared. Ready.
Red days expose the truth about this market:
Holding and hoping isn’t a strategy.
When the indexes drop 2%, 3%, even 5%, the “long-term investor” crowd starts sweating bullets.
They tell themselves “It’s just a dip.” They convince themselves to ride it out.
But their accounts are bleeding. And they’re powerless to stop it.
Meanwhile, traders can take advantage of the intraday moves.
Red Days Teach What Green Days Hide
Every time the market corrects, I see the same pattern play out:
- Traders who refused to cut losses are now stuck in positions down 20%, 30%, even 50%.
- Traders who “averaged down” on falling stocks are now bag-holding even bigger positions.
- Traders who thought they could time the bottom are now underwater (with no exit plan).
Warren Buffett once said, “Only when the tide goes out do you discover who’s been swimming naked.”
Red days don’t lie. They reveal who has discipline (and who’s just winging it).
The only traders who survive these conditions are the ones who cut losses quickly.
Not at -10%. Not at -15%. At their predetermined stop loss, usually -5% to -7%.
One bad trade can’t hurt you if you cut it fast. But one bad trade you refuse to exit? That can wipe out weeks of gains.
Cash Is A Position
You know what’s better than being down 3% on a red day?
Being down 0%.
Cash is a position. And it’s the most underrated one in trading.
When you’re sitting in cash, you’re not stressed about market direction. You’re not checking the indexes every hour. You’re not hoping the Fed saves your portfolio.
You’re waiting.
Waiting for the right setup. The right catalyst. The right entry.
And when that setup appears, you strike. Fast. Precise. Then you’re back to cash.
This is exactly why I push paper trading so hard. It trains you to sit on your hands until the opportunity is undeniable.
No FOMO. No revenge trading. No desperation plays.
Just patience and preparation.
Why Red Days Don’t Ruin Me
My portfolio isn’t correlated to the S&P 500. Or the Nasdaq. Or any index.
When the market drops, I’m not automatically down.
When it rallies, I’m not automatically up.
Because I’m trading individual setups, not the overall market direction.
A small-cap stock can spike 300% on a red market day. I’ve seen it dozens of times:
Low-float runners don’t care if the SPY is bleeding. They only care about their own catalysts, their own squeeze potential, their own momentum.
That’s the advantage of being nimble, of trading outside the major indexes.
Big accounts, mutual funds, hedge funds … They can’t move fast. They’re stuck holding positions through the bloodbath.
But traders with small accounts who follow a disciplined process can be in and out in minutes.
Red days don’t scare us.
They remind us why we trade this way in the first place.
What To Do On The Next Red Day
Don’t panic. Don’t average down. Don’t hold. Don’t hope.
Instead:
- Review your open positions. Are any of them hitting your stop loss? Cut them.
- Sit in cash if there’s no clear setup. Patience beats forcing trades.
- Paper trade if you need the reps. Build your pattern recognition without risking capital.
- Watch for opportunities. Red days often create the volatility needed for explosive small-cap moves.
This market will have plenty more red days. That’s guaranteed.
The question is: Will you be ready? Or will you be another “hold and hope” casualty.
Cheers,
Tim
Timothyskyes.com & Grey Swan Investment Fraternity
P.S. from Addison: We don’t necessarily “cheer” for down days in the market – nobody wants to see their net worth decline – but dealing with market pullbacks is a critical part of a mature investor’s strategy.
Pullbacks are healthy. They squeeze leverage out of the system. They give traders a much-needed wake-up call to reposition if necessary. And they help investors consider the crucial role of cash in their portfolio.
While this is a holiday-shortened trading week, we’ve arranged for a unique presentation with Tim Sykes on Thursday @ 2pm EST/11am PST during Grey Swan Live! Mr. Sykes will unveil a novel trading strategy we believe you may be interested in.
Tim Sykes is one of the top traders in the game today. We’ve been working with him in one capacity or another for over a decade.
Spoiler alert: Tim uses a proprietary indicator to identify stocks on Fridays that are poised to spike higher when markets reopen after a given weekend. As you’ll see, Tim’s unique strategy is well-suited for consideration during the holiday season.
