However, for the day-trader, this market volatility can be also seen as an opportunity. In a bearish market, where there is high volatility, you will take short positions. In a Bullish market, with high volatility, you will take long positions. The key here is that you will take positions with the overall market trend. When trading in harsh market environments, it is easy to lose your head, so it’s important to remember to stick to your rules and have a plan before you start.
Traders concern themselves with economic calendars surrounding news events that include:
- Federal banks
- Economic data
- Government policy
- Global news announcements
We recommend that all traders check the weekly FOREX Calendar (found HERE) to make sure they know what they are trading into. We encourage our traders to avoid any trades around news, to avoid the potential for unpredictability and losing money in the market. Trading into a news announcement is a breeding ground for inexperienced trader losses.
Another way to avoid risk is to make sure that you follow you know your rules before the trade starts. The harder part is following them once the trade begins! We always recommend using a stop-loss order to protect against a larger market loss. Have a plan for what you’re going to do with each trade before you start, as well.
Know your risk levels and the maximum loss you’re willing to take for a day. If you reach this number or take more than 3 losses in a row, you should likely stop for the day. In an extremely volatile market, things may move too quickly for you to catch a good position. Professional traders know when to quit and try again another day.
Once the trade starts, you may be tempted to move your position or change the plan. This is a normal response but you need to ignore it. Stick with your rules and strategies and ignore that emotional response. Having the discipline to trust the system is what separates an amateur trader from a professional. There’s nothing wrong with a small loss, small win, or even a break-even. If you stick with the plan, you can even profit in a volatile market!