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Invest Like a Trader: How to Navigate Volatility

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Real Money contributor Stephen "Sarge" Guilfoyle weighed in on how to trade a volatile market, his thoughts on Walmart's (WMT) earnings and what he's watching in the markets. 

"I think you have to start at the very beginning. Don't worry about trading this market. Worry about understanding this market, so you have to understand and then you have to identify where your opportunities are, and where your threats are. This way you can adapt. If you can't understand, you can't identify, then you can't adapt," said Guilfoyle. "You need to adapt in order to overcome. It sounds crazy sounds like it came from my military training, which it kind of did, but I think traders have to approach this game the same way a pro-athlete would approach their game. Secondly, the easiest way to tamp down volatility is through your cash level. If you're nervous, if anything keeps you up at night, forget about outperforming the market. Better to underperform the market to both the upside and the downside. Then to only perform outperform the market the wrong way." 

"So if anything makes you a little nervous, sell some. You don't have to sell it all. If it's a name you like, sell some to increase that cash flow. I have been running with cash levels above 25% for about a year and a half," Guilfoyle continued. "People think that's crazy for a Wall Street guy, but you know what, ...I'm still benefiting from the market going higher. I'm still feeding my kids. It's not a problem. But during those downfalls, we've had two pretty serious corrections over that time. I have not had to sweat it out the same as everyone else because I had a substantial amount of money in simple cash."

And what about Walmart? Guilfoyle wrote about how he'd trade Walmart after the earnings Thursday morning. 

"If it gets to $103.50 and if it can take that spot and hold that spot, it would probably show some momentum. That's where I would buy it. See when you see, when you understand technical analysis to agree, if something approaches a pivot point, it could show resistance here or it could be a catapult. So you don't really necessarily want to buy it ever at that point, you want to see if it can gain momentum or if it comes in. And I didn't buy it this morning, obviously, cause, and it's coming in now. So $103.50 would have been a lousy point of purchase," said Guilfoyle. 

Related. Here's How I'm Trading Walmart

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