Honey, I Shrunk The Account! (The Cestrian Circle Newsletter) - NO PAYWALL
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Analysis by Alex King, CEO, Cestrian Capital Research, Inc.
The recent rip-roaring rally in U.S. equities has left many on the sidelines and many rekt. If you manage money - your own, other people’s, all the same - for long enough then at some point the market is going to punch you in the face then start stomping on you as you keel over. This is by design. The market is a Sorting Hat designed to take money from those who are losing and give it to those who are winning. It is not a nice or pleasant place to be, and it is not fun. If you think it is nice, pleasant, or fun, you aren’t doing it right because you don’t respect the market enough.
This note is intended for anyone who has lost money in the market and is sat there saying, Wait Wut? Which is to say - anyone who has money in the market. Because since even Maestro Druckenmiller has had his sorry backside handed to him on occasion, so have you, and if you haven’t yet, buckle up because you will.
Here’s Part I of your 12-Step Recovery Program. Part II coming soon.
1 - Acceptance
Own it. It was your fault. Mr Big did not take your money. You gave it to him of your own free will. Either you didn’t understand what you were doing, in which case you need to study harder, or you did understand but executed poorly, in which case you need to slow down to a crawl and do everything at a snail’s pace until you have the execution down pat.
Do not worry though. Nothing is unrecoverable as long as you clear your mind, detox yourself from the losses, and commit to winning, calmly.
2 - Review
We all of us have natural strengths and weaknesses in the market as we do in life. So when working out where all the money went, look at what you have done well and what badly and do more of the former and less of the latter. Obvious but takes discipline to do it. As regards your underwater positions - many successful money managers say that if you are stuck in a losing positions just get out of it even if that means eating a big loss. This view argues that the position now owns you, not vice versa, and says that this way you get some firepower back and some emotional balance back. You have to decide if that is right for you or not.
3 - Simplify Your Setups
The longer I do this the more I think there are two reliable methods of making money from public securities. The first is to use long-run accumulation / markup / distribution in big liquid stocks - the Wyckoff Cycle method we use and teach here - and be patient so you can catch major moves. And the second is to trade momentum using algorithms or short term moving averages. As for technical swing trades, I personally think that Elliott Wave / Fibonacci levels (our chosen method) and TA in general is fading in its usefulness, mostly because you can learn it for free on X now and the charting tools are also free. Stanley Druckenmiller says that he finds TA about 20% as powerful as it once was.
4 - Common Stocks Or Options?
I personally think options are too-hard. You have to be right in multiple dimensions all at the same time. Whereas with common stocks you have to be right on the Y axis and, ideally, the X axis too but at least the X axis isn't actively working to hurt you. Now, my colleague Jay would tell you this is incorrect, that options can really move the needle for you. But he is a 30+yr statistician and data scientist with a Ph.D and decades of experience in studying and modeling complex distribution patterns. So I would wager that he is probably a bit better at trading options than are you or, for sure, me.
5 - Keep It Simple Stupid
In my experience you do not need to use exotic securities (options, warrants, futures etc) or exotic underlyings (obscure and/or small cap stocks, crypto “projects” etc) to make good money consistently. In my opinion the use of exotics more often than not leads to negative outcomes vs. what could have been achieved with simple liquid names correctly structured. But that's just me. People build whole careers just investing in or trading a handful of ETFs and stocks, with good reason.
Look out for Part II in this series! Any questions, reach out using the comments section below.
Cestrian Capital Research, Inc - 26 May 2026