MW This bear market signal Wall Street ignores is putting your money at risk right now

By Michael Sincere

Veteran trader Steve Burns prepares for a 50% decline and exposes the 3 'deadly stock-market sins' destroying portfolios today

When the SPDR S&P 500 ETF Trust $(SPY)$ closes below its 200-day moving average on a daily basis, go to cash.

Steve Burns is the founder of NewTraderU.com, a stock-market-trading education platform he launched in 2011, and the author of more than 25 books on markets, trading psychology and risk management. His titles include "Trading is Math" and "How to Trade the Stock Market Like a Book."

In this recent interview, edited for length and clarity, Burns shares his trading tips, including the simple go-to-cash signal most financial advisers will never share with you, why averaging down in individual stocks is a trap that destroys portfolios - and the three emotional mistakes that separate investors who build wealth from those who don't.

You will never hear a financial expert with an incentive tied to your capital tell you to go to cash.

MarketWatch: What is the single biggest mistake investors make when stocks start falling, and how do they avoid it?

Steve Burns: Either they panic too late or they do not panic at all. They wait until they are already down 20% to 40%, then they get out. If you are going to lock in profits, it is far better to panic early than to panic late.

Watch for these signals: When a stock closes below its five-day or 10-day moving average, that is a good place to take profits. When it gets overbought above the 70 RSI (Relative Strength Index) and then closes back below it, that is another. Do not wait until you are already down 30% or 50%.

MarketWatch: One move could protect investors that financial experts almost never recommend. What is it?

Burns: Going to cash. Experts will never tell you that because most of them earn their living through capital-management fees, whether it is a mutual fund, a money manager or an adviser. If your capital is in cash, they are not getting paid. You will never hear a financial expert with an incentive tied to your capital tell you to go to cash. That is simply not in their interest.

MarketWatch: So how should investors actually use the 200-day moving average as a go-to-cash signal?

Burns: There are simple systems that backtest well. The easiest: When the State Street SPDR S&P 500 ETF Trust (SPY) SPYcloses under its 200-day moving average on a daily basis, you go to cash. When it closes back above, you go back in. For investors who want less activity, you can do this on a weekly or monthly basis. At the end of the week or month, if the SPY is below the 200-day, you move to cash. When it closes back above, you go back in.

The monthly version has beaten buy-and-hold in historical backtests. You will be in cash during the worst drops and back in when the bull market resumes. That is how you build asymmetric returns.

MarketWatch: What is the danger of averaging down in individual stocks as they keep falling?

Burns: It is one of the costliest mistakes investors make. A stock looks like a bargain at $100, so it feels like a great deal at $75 and an even better deal at $50. The problem is that most individual stocks do not come back. Only the indexes reliably recover to all-time highs because they always hold the current winners. The majority of long-term market returns come from a very small number of individual stocks. The rest go nowhere or go to zero.

If you are going to average down, do it with index funds where the winners are always included. Do not do it with individual stocks unless you have the deep fundamental knowledge of a professional investor.

MarketWatch: What do you tell long-term investors who do not want to become active traders?

Burns: You have two good options beyond indexing. Value investing, what Benjamin Graham and Warren Buffett practiced, means finding businesses that are underpriced based on their actual cash flows and profit metrics. And trend trading means following price action systematically, using signals like a five-day or 20-day moving average crossover to go long, and locking in profits when the trend breaks. Both approaches have long track records of working outside of simple buy-and-hold indexing. Most investors have never needed them because the last several years have made everything look easy. That is no longer the case.

I only expose my capital to risk during genuine uptrends or when I have a clear, favorable risk-reward setup. The rest of the time, I am in cash.

MarketWatch: You built your trading philosophy after getting hurt in the 2002 bear market. What did that experience teach you that still shapes how you invest today?

Burns: Risk aversion. Watching the dot-com crash, then 2008, then the pandemic drops, changed how I think about position sizing and cutting losses. When you have built a large portfolio and watch half of it disappear, a 50% drawdown stops being a number on a page. I only expose my capital to risk during genuine uptrends or when I have a clear, favorable risk-reward setup. The rest of the time, I am in cash.

MarketWatch: You've written that investors are their own worst enemies. What are the three emotional mistakes that destroy accounts?

Burns: Fear, greed and ego. Fear makes traders unable to cut a loss. They are afraid of locking in the loss, so they hold on while it gets bigger and bigger until their capital is trapped and they cannot act on anything new.

Greed makes people take everything they have built and try to double it. I have watched people lose retirement savings chasing crypto and penny stocks. If you have money, protect it.

Ego makes traders hate being wrong. They have strong opinions and predictions, and when those do not pan out, they either quit or go silent publicly because they are too embarrassed. They care more about being right than about making money. Those are the three deadly sins of trading.

MarketWatch: What actually separates traders who make money consistently from those who blow up their accounts?

Burns: Three things. First, a positive expectancy model. That means a strategy that produces more in winning trades than it loses in losing trades over time. It is true whether you are a scalper, a swing trader or a value investor like Warren Buffett. Second, sound risk management embedded in the system. Consistent, measured position sizes ensure that a bad stretch does not wipe you out. Third, the discipline and perseverance to execute that system through every market environment. Without all three, nothing else matters.

MarketWatch: Is buy-and-hold indexing still a viable strategy, or has something fundamentally changed?

Steve Burns: From the 1929 peak to 1953, there were essentially no price returns in the market. Adjusted for inflation, they were negative. The 1970s were brutal. Everyone treats buy-and-hold as the holy grail because they are anchored to the extraordinary run from 1982 to today. That is a very specific window in financial history, driven by Federal Reserve expansion and government deficit spending. It is still a viable strategy for the S&P 500 right now. But if those forces ever reverse, the strategy has to be re-evaluated.

Investors should be prepared for a 50% drawdown sometime in the next five to 10 years. It will only recover to all-time highs if the Fed and the government continue doing what they have always done.

Michael Sincere is a writer and researcher and the author of several books, including "Understanding Stocks," "Understanding Options," and "Help Your Child Build Wealth."

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-Michael Sincere

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May 30, 2026 14:25 ET (18:25 GMT)

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