3 Psychological Hurdles During Volatile Markets

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3 Psychological Hurdles During Volatile Markets


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Index

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

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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.

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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.

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3 Psychological Hurdles During Volatile Markets
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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.

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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.

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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.

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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.

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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.

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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.

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

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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.

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Thank You