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Navigating volatile markets - 5% daily moves.

First I think you must ask yourself are you a day trader, scalper, or a long term investor. In the event your the latter then you need not worry about the volatility and you can skip over this article. It's really not necessary for you to stress yourself about daily market swings if you are in for the long run. This post is for those that trade forex, stocks or commodities and want to be in and out before market sentiment changes.


If you have read this far then you must be a scalper, day trader or a short term opportunist. The markets are moving extremely fast now so how do you keep up? The biggest tip I can give you is to control your trade size and adjust your stop levels. While this might seem obvious to some it's not always so easy to make these changes. In the past I would trade with a 100 point stop or less for Wall Street indices and even tighter for forex trades. In the current market you would be stopped out within minutes using those trade parameters. So adjusting the trade size down and the stops further out keeps me in trades while adhering to my risk per trade rules.


Now that we have established trade size and stops we can move to the exciting part, executing trades. It's important now more than ever to use limit orders to ensure you get the price you want without slippage. I know it's tempting to click the market buy button when a price looks good, but poor executions can severely eat into your profits, especially when scalping. I try to always use a series of buy or sell orders when possible to average into and out of trades. In a volatile market having structured buy and sell orders in place keep you from making irrational decisions in the heat of the moment.


The last important point is to not be afraid to take profits off the table if the market quickly moves your way. It's devastating to see your profits go up in smoke because you wanted a few more points or pips. The market rarely runs in one direction long without retracing some or all of that move. If your undecided about the next move then take 1/2 the profit off the table and move your stop on the remaining to break even. At least you have locked down some cash and can watch your remaining position possibly run further. The key here is to not get overly greedy or pessimistic and make a bad decision. Try to trade the market without emotion and follow the mechanics you have set out in your trading plan.

#volatility #scalping #daytrading

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