Happy Friday Traders,

Let’s face it! 2022 is off to a bumpy start and we might have to keep the seat belt on a little longer. When the market is volatile, our emotions are high. A couple of volatile days followed by business-as-usual can be tolerated by most but when markets are continuously volatile over an extended period that can take a toll on not only the balance on your account but also emotionally.

During environments like these, panic and fear cloud our thoughts especially when an exit strategy was not in place before entering a trade. When that happens, we stay in the trade longer than we need to or exit too soon. Another common mistake traders make in these types of market conditions is prematurely assuming that the worst is over and enter new trades aggressively to make up for the losses. Others feel the need to keep trading while their emotions are running wild when they should be slowly stepping away from their keyboard and taking a much-needed mental break.

The all too common should I stay or should go syndrome we face is real. It’s hard to decide on when to take a loss or take profit. That’s why we spend the time before entering the trade to determine where those numbers are and automate the orders so we can remove our emotions from the trade. Now when managing trades during volatile markets, we are dealing with gapping situations where orders don’t get filled on a stop loss, and now you are left to manually make that adjustment of taking a bigger loss than anticipated or stay a bit longer say a prayer and hope for a few bounce back days to recover some of those losses. On the flip side, you have a trade that is profitable but hasn’t quite hit your target yet. Do you allow the trade to run its course or do you lock in profit early? You as the trader will have to make these decisions and they aren’t always the correct ones in hindsight. You might decide to manage the swing trade differently than the position trade. If the position trade was a cash flow trade, you might decide to stay in the trade as long as the trend is not violated because you have more time and you would on a directional swing trade. There’s no telling whether this process will work every time but having the rules set in place will keep you consistent long enough to evaluate over time whether it works or not rather than making random decisions.

If anyone has the crystal ball on exactly when the market hits resistance and sells off then finds support and bounces back please be a good sport and share. None of us can time the top or bottom of the market accurately every time. Yes, we have indicators we can use but they don’t always pan out. If the market breaks one moving average we assume the next one will hold and when that doesn’t we say the next one will. Before we know it the market is piercing through the 200 day MA and you are left wondering what happen because you were buying betting that support would hold at those moving averages. If you plan to pick up shares of stocks you wanted to own long-term for cash flow that’s one thing, have a plan but do not try to guess when the market is going to bottom out.

Practice patience! In some cases, if trading in volatile markets gives you anxiety especially if you’ve been smacked in the face a few times, it’s okay to walk away and take a break. If you feel the urge to click a button, paper trade, or learn a new strategy, update your playbook and journals to stay busy.

Ladies, tonight is our monthly Women in Trading webinar. Join me tonight at 8:30 PM EST.

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