I'll be away from the 19th April till the 4th May so I won't be around to produce new content. I decided to to re-publish old blog posts that focus on the psychological aspects of trading so I hope you enjoy! See you soon
How to Deal with the Roller Coaster Ride of Trading
Recently I was asked by a person close what it felt like being in the middle of a volatility storm as the one we experienced last month. At first I wanted to describe it as exciting, something a thrill seeker would get a kick from but then I thought about newer traders who had yet to experience these kind of conditions and the emotional response which was awoken through all of this.
How to Deal with the Roller Coaster Ride of Trading
Recently I was asked by a person close what it felt like being in the middle of a volatility storm as the one we experienced last month. At first I wanted to describe it as exciting, something a thrill seeker would get a kick from but then I thought about newer traders who had yet to experience these kind of conditions and the emotional response which was awoken through all of this.
In saying this, I thought back to my first experience in these topsy turvy movements and how I had to face up to some of my most scariest trading fears.
When you're still new to the game you'll gather snippets from the pro's on how you see flashes of price movements before your eyes. They immediately bill it as a very unpleasant experience and in the back of your mind you begin to have second thoughts, hoping that these kind of situations don't surprise you anytime soon.
If you ever been on a roller coaster you'll know that anxious feeling you get when you queue in the line and start hearing what others in the queue are expecting. Psychologically you are building up the tension inside and try to rationalise what you're about to do but your fears won't back off.
You're getting closing to the front and your heart is racing, your breathing is restricted and your face turns pale.Your friend turns and says to you "Hey man stop looking squeamish , it's just a roller coaster. Nothing to be scared about". But your anxieties won't go away. You manage to convince yourself that this is it. Time to take the plunge.
The attendant makes sure you're strapped in safely and goes through the whole line. He gives a signal to the controller and suddenly the coaster begins its ascent.
The distance between the coaster and the top of the line is getting shorter and shorter and you're panicking, legs dangling in midair and an eerie silence has taken over the general mood. And then...
Boom the wind blasts your face with rapturous force increasing your anxiety. You tense up and your body feels paralyzed and...Wowwee up and under racing along the track with no limitations twisting and twirling approaching the next bend fast, ready for cork screw.
Sssshhh you going around in a circle at such a fast pace you can't place your direction and that's when you finally let go and let the force of the coaster dictate the control of your body.
The coaster begins to slow down and you start to feel your muscles relax and relief that it's all over until it comes to a halt.
What I've just explain is what someone who has a phobia of roller coasters, coasterphobia, would experience. This is exactly how it feels when you hit high degrees of volatility. The speed at which it happens is quite fast and violent and there's absolutely no control.
These conditions do blow into the markets every so often and it's imperative for you to know some basics steps to follow if you do encounter them.
Firstly don't try and trade on instinct, there are always temptations when moves such as these materialize. These conditions are quick and you're execution needs to be accurate. Best left to the traders who've had a few years worth of experience to fall back on.
Secondly, ensure that you're strapped up at all times. What I mean by this is your risk management rules. If you are feeling brave and capable enough to trade always make sure you have a stop loss as profitable trades can quickly turn into losses in a matter of minutes.
Thirdly, trade with less gearing, it's always difficult to call when such conditions are going to end so one way of entering a trade without standing the risk of getting stopped out all the time is to begin with a very small position. This way you're allowing your position breathing space and flexibility. Once you're certain the worse is over you can begin building your position to full capacity.
Thirdly, trade with less gearing, it's always difficult to call when such conditions are going to end so one way of entering a trade without standing the risk of getting stopped out all the time is to begin with a very small position. This way you're allowing your position breathing space and flexibility. Once you're certain the worse is over you can begin building your position to full capacity.
And lastly remember that the best thing to do when you don't see high probability setups is sit on your hands and wait for the chaos to subside. Once it has the best opportunities will present themselves.
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