What is our biggest enemy in the market? Inexperience? Bad luck? Bad signal? I would argue that it is volatility. After all it is the reason for all of the other three reasons we fail. It can come out of nowhere and spoil our trading plans for a long time. And we have no way to hold control over it.
BUT! We can control what we do in conditions of volatility in the markets.
So, what can we do to hold at least some control over our trading?
1. Base you trading strategy around fundamental analysis.
2. Do not put your hopes in one trade only.
3. Don’t enter a volatile market.
4. Never hesitate to use trading signals.
5. Never doubt yourself.
6. Do not obsess.
1. Base you trading strategy around fundamental analysis.
As we know every segment of the market can be volatile. Stocks, commodities, currencies and so on. There is no asset that is not going into volatility once every so often. So, it is better to be prepared for it before it happens.
And how can we possibly navigate a situation where locations and time are impossible to predict?
Only by basing you trading strategy around fundamental analysis where you can be sure that deep research of the market is going to help you escape losses even in the conditions of volatility.
2. Do not put your hopes in one trade only.
Well, I can say that this rule is supposed to be applied to every trade you are ever going to put down. If you are going to put your hopes in one trade only you are going to be very limited in your possibilities. And that is just crossing out the purpose of trading. You are supposed to get more possibilities with trading, not vice versa.
Never ever put your hopes in a single trade. What if it is THIS trade that is going to be volatile? What are you going to do then?
3. Don’t enter a volatile market.
Well. That is obvious – if you are feeling that the market is going to go nuts and volatility is going to swallow it whole, simply put no trades at all. It is better to wait out than to risk everything.
Wait your hunch out, but be careful at all times.
4. Never hesitate to use trading signals.
You know those kids at school who were too cool to read books and study? And we all wanted to be that kid? Well, in the markets it is the contrary – the more you read and know – the cooler you are. And you and never ever too cool to use a trading signal. Especially when there is a chance of high volatility.
5. Never doubt yourself.
Indulging in self-doubt and thinking that you are worthless is not going to bring you any good. Never doubt your decision even when you see the result of it turn out differently than you anticipated. Did you miss the winning trade? No big deal. Just write that down in your trading journal and move on, taking the lesson into consideration.
6. Do not obsess.
Do not try and act as if markets are always volatile. This way you are going to trap yourself and become the victim of your fears of getting caught in the middle of turbulence. Never obsesses about it and go with the flow. This is going to really help you be stress resilient when the turbulence does come.