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3 Psychological Hurdles During Volatile Markets

There are human tendencies that can block the road toward achieving our financial goals. Here's how to get around them.

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3 Psychological Hurdles During Volatile Markets

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  1. 3 Psychological Hurdles During Volatile Markets

  2. Index • Volatile Markets • Trading Psychology • 3 Psychological Hurdles During Volatile Markets • Use Of Risk Management During A Volatile Market

  3. Volatile Markets • The currency markets are considered to be volatile. • The Volatility is magnified by the use of leverage by participating traders. • Here is a short guide to surviving a volatile currency trading environment.

  4. 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.

  5. 3 Psychological Hurdles During Volatile Markets

  6. 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.

  7. 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.

  8. 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.

  9. Use of Risk Management During a Volatile Market • There is no better time to use proper risk management than during the volatile market. • Risk management can save the trading account.

  10. 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.

  11. 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.

  12. If using the proper position sizing, it is ok to use a full stop to let the trade breathe.

  13. 3. Lock in Profit often • 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. • 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.

  14. Thank You

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