3 Psychological Hurdles During Volatile Markets
Index 1. Volatile Markets 2. Trading Psychology 3. 3 Psychological Hurdles During Volatile Markets 4. Use Of Risk Management During A Volatile
Market
Volatile Markets ď‚— The currency markets are considered to be volatile. ď‚— The Volatility is magnified by the use of leverage by
participating traders. ď‚— Here is a short guide to surviving a volatile
currency trading environment.
Trading Psychology Trading psychology is all about controlling the
emotions. The mood of trader can have a profound effect on how
he/She views the market. Here are some major psychological hurdles that are
particular in the volatile markets.
3 Psychological Hurdles During Volatile Markets
1. Deal With Losses Sometimes you have to admit when you are plain
wrong about a trade that you made. If an extra volatile market, even holding on a bad trade
for the extra day can cost you plenty. It's better to admit when you are wrong and cut your
small loss before it can become a sizable loss.
2. Deal With Profit It might look silly, but you have to figure out a rational
way to deal with winning trades. It simple, but winning trades can put you off balance
by making you feel like you can't make a mistake. It Important to keep an objective eye, even if you are
making a large number of winning trades.
3. Know When to Back Off Sometimes the market lacks the sense whatsoever. It keeps pulling you in, and then take out the stop and
dragging your account balance down. It is ok, to step back and leave the market for a while
till it settles down. There is money to be made every day.
Use of Risk Management During a Volatile Market ď‚— There is no better time to use proper risk management
than during the volatile market. ď‚— Risk management can save the trading account.
1. Position Sizing When the swings are wild, trade smaller. The size of moves makes up for the smaller position size. A large position size makes you feel nervous as market
whips around with the trade. It could make you do something you regret later when
the market takes off in the intended direction.
2. Correct Use of Stops Special attention needs to be taken on the placing of
stops in an overly in volatile market. Most of the time, tight stops not work at all in a wild
market. Trades need distance to breathe. Otherwise, traders can be stopped out often by price
whipsaws.
ď‚— If using the proper position sizing, it is ok to use a full
stop to let the trade breathe.
3. Lock in Profit often ď‚— Once the market moves in the preferred direction and
your trade is in the money, do not hesitate to set your stop and lock in some of those gains. ď‚— There is no shame in getting stopped out for profits as
often as you can guarantee that end up with the profits rather than the losses.
Thank You