In volatile markets, trade with composure
We all like to see movement in the markets – that’s what makes the trades. But when there’s volatility like we’re experiencing now, many traders get nervous and back away.
If your appetite for risk is low, it makes sense to do just that.
But if you’re prepared to take on a little more risk, volatile markets can offer some of the best trading opportunities.
Why the volatility?
It’s usually hard to pin market uncertainty on any single cause, but the culprit for the current situation isn’t hard to isolate. Covid-19 – the blackest of black swans – has triggered panic on a scale not seen since the global stock market crash of 2011. What began as a sudden regional stoppage of economic activity quickly turned into a full-blown crisis, choking trade across the world. And, much like the virus itself, market uncertainty looks like it’ll be around for quite a while.
| How did Covid-19 spread market uncertainty?
Three golden rules for volatile markets
Trading styles may differ, but in volatile markets most experienced traders aim to:
- Trade smaller
It’s not easy to recover after a large loss. Plus, the pressure to recoup will make it hard to stick to your rational trading strategy. One rule of thumb many traders stick to is not risking more than 5% of their trading capital on a single trade.
If your strategy includes multiple trading positions, make sure there’s some diversification across products and asset classes. A mix of long and short positions can also mitigate the risk of wide market movements.
- Have a strategy – and stick to it
It’s very difficult to predict market moves in the short term. Prices can continue to rise or fall over many trading sessions before you see a reversal. So build positions carefully and plan your exit points in advance, using stop losses and limits to set your maximum risk. Avoid moving stop losses further away from the current market price if your trade moves against you.
Ready to take on the markets?
The world’s economies are experiencing chaos rarely seen before, but one thing is certain: volatility is set to continue for some time. And that means potential profit for traders who can keep their heads cool and their trading strategies beholden to strong risk management.
FXTM is here to help you make the most of the markets, with a comprehensive range of accounts, platforms, tools and strategies.
Discover more about current opportunities, and the trading strategies to use in volatile markets by clicking here.
Trading is especially risky during times of volatility.
The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. FXTM, its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.
- Keep Trading the Technicals to Take Advantage of a Quiet News Week
- Trading Strategies to Suit The Week of 18th October
- Will Commodities Offer Protection From Inflation?
- Earnings Season to The Rescue – What to Watch Out for This Week
- State of the Nation – Up to Date Reports on Which Brokers Can be Trusted – FXTM
- ‘Diamond Hands’ Traders Get Ready to Buy
Keep Trading the Technicals to Take Advantage of a Quiet News Week
Trading Strategies to Suit The Week of 18th October
Safest Forest Brokers 2020
|Broker||Info||Best In||Customer Satisfaction Score|
|#1||Your capital is at risk Founded: 2011||Global CFD & FX Broker||
BEST FOREX BROKER Visit broker
|#2||Your capital is at risk Founded: 2014||Global Forex Broker||
BEST SPREADS Visit broker
|#3||Your capital is at risk Founded: 2014||Global Forex & CFD Broker||
Best Trading Conditions Visit broker
|#4||67% of CFD traders lose Founded: 2006||Global CFD & FX Broker||
ALL-INCLUSIVE TRADING PLATFORM Visit broker
|#5||CFDs and FX are complex instruments and come with a high risk of losing money rapidly due to leverage. Between 74-89% of retail investor accounts lose money when trading CFDs. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. Founded: 2010||Global Forex Broker||
Low minimum deposit Visit broker
Stay up to date with the latest Forex scam alerts
Sign up to receive our up-to-date broker reviews, new fraud warnings and special offers direct to your inbox