Money-Making Monday: How to Profit from a Market Correction

I love the smell of Napalm in the morning!  

That's the classic line from Apocalypse now that I'm often reminded of during Member Chat, when people start to get nervous about a market sell-off.  Rober Duval says "It smells like victory" and laments that "Some day this war's going to end." and THAT is how a prepared trader should feel about a market pullback.  

Rather than victory, it smells like OPPORTUNITY – even if you are not on the right side of the trade.  It's an opportunity to stress-test your positions and check your portfolio balance because, if you can survive this – you can probably survive anything.  

At PSW, we keep 5 virtual portfolios for our Members.  A $25,000 Portfolio (for small trades), a Butterfly Portfolio (for well-hedged trades) and a usually bearish Short-Term Portfolio (aggressive trades) which acts as a hedge for our 2 larger, portfolios, the Long Term Portfolio (aggressive and low touch) and the Income Portfolio (conservative and low-touch).  

From a balance perspective, we're primarily concerned with the sum of our Long-Term and Short-Term Portfolios and, currently, that's $175,178 (up 75.2% for the year) and $561,856 (up 12.4% for the year) for a combined $737,034 – up 22.8% from where we began the year ($600,000) despite the sharp pullback in the market.   That's BALANCED!  

Another key to our success is that we are using just $438,750 of our $1,200,000 in ordinary (non-portfolio margin) buying power (36.5%) between the two – THAT leaves us in fantastic shaped to pounce when the market throws a sale like this one.  In the Income Portfolio, we're using just 1/10th of our buying power – we've been waiting for an opportunity like this all year!  

We just had an extensive conversation in our Live Member Chat Room about portfolio allocations and scaling into positions, so I won't re-hash the strategy here but I will say that, if you are not weathering the market storm well enough to be in a buying mood – you're doing it wrong!  

Specifically, in our Short-Term Portfolio, we've been using DXD…
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