5 Tips for Trading during Volatile Markets
An
increase in volatility improves trading opportunities. The market
continuously swings that triggers positive thoughts for a monumental
upside, but then, there is also a chance for substantial losses if
precautions are not taken. When the market is volatile you have to make
adjustments with respect to your trading strategies since the markets
are erratic.
Certain tips can prove beneficial while trading in volatile markets:
1. Trade selections
Volatility of the market can cause temptation for earning profits. Unprofessional traders can go wrong here by making wrong trading selections. If there are trading opportunities to earn a profit in a volatile market, there is also the chance of incurring losses. Do not place too many trades rather consider your risk tolerance level. You must take into account both your financial and psychological levels of risk tolerance.
Volatility of the market can cause temptation for earning profits. Unprofessional traders can go wrong here by making wrong trading selections. If there are trading opportunities to earn a profit in a volatile market, there is also the chance of incurring losses. Do not place too many trades rather consider your risk tolerance level. You must take into account both your financial and psychological levels of risk tolerance.
2. Trade with smaller trade positions
Leverages affect trades mostly when the market is volatile. Even if you have the margin of 1% or half percent you should be considering the extent of leveraging and position sizing. Trade with an average of 1 lot position rather than 2 lot position since the potential loss of 100-200 pips can be incurred.
Leverages affect trades mostly when the market is volatile. Even if you have the margin of 1% or half percent you should be considering the extent of leveraging and position sizing. Trade with an average of 1 lot position rather than 2 lot position since the potential loss of 100-200 pips can be incurred.
3. Discipline is the key to effective trading
When the market is volatile you should be trading with more discipline. Stick to your trading strategy no matter whatever is the condition of the market. Restrain yourself from trading mistakes and do away with temptations. Abide by the set stops, benchmarks for risk management and the contingency plan confidently. This will help in determining the risk levels.
When the market is volatile you should be trading with more discipline. Stick to your trading strategy no matter whatever is the condition of the market. Restrain yourself from trading mistakes and do away with temptations. Abide by the set stops, benchmarks for risk management and the contingency plan confidently. This will help in determining the risk levels.
4. Tighten your stops
Tightening stops can act as great risk managers at times when the market is volatile. Tight stops can protect the position of your currency. Think of placing stops with lesser pips. A break in stop signifies chances of lower trend and tightening the stop can save you from losing. The currency pair is the determining factor of the width. Traders will have wider stops while trading with Yen. Go for 75 pip width stops instead of 100 pip.
Tightening stops can act as great risk managers at times when the market is volatile. Tight stops can protect the position of your currency. Think of placing stops with lesser pips. A break in stop signifies chances of lower trend and tightening the stop can save you from losing. The currency pair is the determining factor of the width. Traders will have wider stops while trading with Yen. Go for 75 pip width stops instead of 100 pip.
5. Pull up your socks!
Do not only trade with currency pair rather accommodate your trading strategy in the market situation. The trader needs to assess the cause behind market volatility. Is the market volatile because of fear or are the mania of buyers that is leading to bullish tone. It is the emotion or overreaction of trader that makes the market volatile. Even the economic events can cause market volatility. The participants of the market can interpret the fundamental data differently unlike the new traders. Surprisingly, the markets can be sold off even when there is a positive growth in the manufacture and the reason for such an ambiguous situation being the market position and interpretation that has been reshaped or shifted. Such market situations can bring a profit as well as losses to the traders. Panic selling and panic buying creates un-tradable situations in the market. These delicate situations might make you flip flop your trading positions or else make you regret over your premature stopping.
Do not only trade with currency pair rather accommodate your trading strategy in the market situation. The trader needs to assess the cause behind market volatility. Is the market volatile because of fear or are the mania of buyers that is leading to bullish tone. It is the emotion or overreaction of trader that makes the market volatile. Even the economic events can cause market volatility. The participants of the market can interpret the fundamental data differently unlike the new traders. Surprisingly, the markets can be sold off even when there is a positive growth in the manufacture and the reason for such an ambiguous situation being the market position and interpretation that has been reshaped or shifted. Such market situations can bring a profit as well as losses to the traders. Panic selling and panic buying creates un-tradable situations in the market. These delicate situations might make you flip flop your trading positions or else make you regret over your premature stopping.
When markets
are volatile you are more vulnerable for you have a tendency of not
abiding by your trading strategy. This creates further panic in the
market. Fortunate and focused traders reap maximum benefits out of such
volatile situations.
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