Right now, clearly we’re having to deal with a lot of news stories coming out of Europe on an almost daily basis. As such we see elevated volatility. There’s a greater perception of risk and so people feel they have to act. But you know, when there’s an abundance of news flow and the market is visibly nervous about it, it’s all too easy to become wound up in the “what if’s” and start to really believe that the market must behave in a certain way. The trouble comes though, when the markets do not do what we expect them to or even more dangerously, stop us out and then move in the direction of our demised trade. Throwing a trading plan out of the window because we see $$$ signs is dangerous at the best of times.
The spiraling out of control of emotions that can follow has not only the potential to devastate your account, but is also absolutely exhausting. All for what I ask you? One day of big profits? Is this genuinely what we believe to be the path to trading success? There are what I like to call “epic days” on which the market moves so drastically and sure that fortunes are made. But these are few and far between and just as fortunes are made, they are also lost and meager accounts are destroyed.
Yet to those who keep their objectivity in check and adjust their expectations within the remit of their trading and risk plans, the rewards can be substantial. Just as the markets can generate more risk when they move violently, because of this very fact they can present highly skewed opportunities to profit from.
If trading is a microcosm of life, then news days are a microcosm of trading. So make doubly sure that on these days you act in very best way you can (win, lose or draw) and make sure you don’t lose your head!