This issue is very important, especially in current situation when market is moving very aggressively, trying to keep abreast with pandemic movements created by infamous Covid-19 virus. Even in normal market conditions it is important to keep cool but now it is even more important not to panic.
It is perfectly normal that you try to find an explanation for each market movement, I do that as well. Sometimes, you might become really nervous, when you have an open deal and some rapid movements take place for which you are not prepared. And then you make a natural thing, you make a mistake, or even worse, many mistakes.
It happens for any trader and the only difference is how someone manages to deal with the situation. Sometimes you have an open deal which rapidly is gaining, and you can see huge profits coming your way until something snaps, the deal “turns around” and you suddenly making losses…
What to do in situations like these? Here’s my approach, my way of trading.
There really ONLY FIVE STATES that applies to any market (deal) transaction where market:
- stands still
- slowly moves against you
- slowly gains momentum
- moves fast against you
- moves fast producing quick returns
You have to do some homework to be prepared for each particular situation. Before opening each transaction, you must be crystal clear what are you going to do with your financial instrument at each given state of the market.
What is your action plan for each of the situation?
You need to understand what is “slow” or “fast” for you, though. Do you follow by the daily average or weekly movements? Is it clear for you when these movements produce abnormality? You need to understand what your actions will be when the price is standing still.
You must describe each of these conditions very clearly for yourself. Once you have done that, you have a clear action plan for virtually every market movement, and it will be much easier to act, to decide. And, what’s even more important, you’ll make fewer mistakes.
In trading, you always have to think about the worst-case scenario. You must be prepared for the worst. Why? Because it is difficult to deal with negative transactions. Profitability is no problem - watching positive deals is a pure pleasure :)
And remember, that safeguarding capital is the key for any of your actions!
Stay tuned!
Agris
Commentaires