Some Tips On Staying Calm In Volatile Markets
Volatility can either be your best friend or your worst enemy, the key is staying calm and not losing your nerve.
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We have a question from a new subscriber asking about yesterday’s sell off in precious metals, asking how we are able to stay so calm when these big shifts happen in the market and whether there are any tips we can give to help them cope with these types of moves, whether trading them or just staying on the side lines with FOMO.
Thanks for the question I think it’s a great question to ask, but there is one part that can be a bit of a false assumption, and that is that we are always calm when these types of moves occur, even though we are use to big and fast moves because we’ve seen them happen so many times before, there are still plenty of times when moves occur that catches us off guard as analysts, if that didn’t happen it wouldn’t be financial markets that’s for sure.
So, just because we might come across as completely numb some of these moves do surprise us as well, make no mistake about that, at the end of the day we are human beings with emotions right, so whether you’re a trader or analyst of economist some of these occurrences like yesterday’s gold rout was surprising, and if there is someone out there that says they predicted that Gold would fall by almost 6% yesterday I would sign up to learn from them if they can show me what process they used to know that would happen, that’s also why it’s important not to get carried away by some of the fintwit personalities that are always bragging about buying every bottom or selling every top.
I’ve been able to buy a few dips and sell a few tops in my trading, but I can assure you that there was some manner of luck associated with those moves, yes of course we do our analysis and we want to convince ourselves that we were just so very clever to sell at the exact right time, but it doesn’t always happen that way.
But coming to yesterday, I think the one thing that yesterday’s move can teach and show us, is that after the covid-19 financial crash, the amount of FOMO among traders and investors have really shot up, and that has caused a lot of excess leverage in the system.
And I think the move yesterday shows us, that if a very small 5 or 7 basis point climb in US 10-year yields causes Gold prices to fall almost 6%, that points to massive over-leveraging. Can you imagine what markets will look like if we get another shock to the markets, I mean another devasting shock, can you imagine what a large scale deleveraging will look like throughout the markets?
Now of course, there was other reasons for the downside that exacerbated the move, stretched positioning to the upside for gold and downside for the Dollar, and as stop losses are triggered it can have that type of acceleration as traders capitulate and dump their positions.
But, again, even though those things were part of the reason for the downside, the size and speed tells us something about the type of leverage in the system right now.
Now, having traded through a couple of days like yesterday you do get used to it, but I would lie to say you will reach a point where nothing surprises you, then you’re either a robot or probably your emotions aren’t working properly.
But all jokes aside, I think experience goes a long way with days like yesterday, but even if you go through 50 days like that, there will always be something that surprises you.
So, my tip would be to just keep at it every day, spend time in the markets, go back to some prior example of big moving days, even if it’s three of 6 years back. Go find those massive moving days in particular asset classes and go see what sparked the move, obviously there will be many reasons why things move, as was yesterday, but mostly there will be good lessons to learn from history.
Apart from that, I know it sounds silly, but try to keep yourself calm.
Taking a step back and just looking at the markets from a more objective view can be quite helpful in times like that.
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If you find this content helpful, you’ll love Forex Source.
There’s a link below were you can learn more about it
https://bit.ly/2HFykNd
----
We interpret and explain price moves in real-time, 24 hours a day. Our team of analysts produce text, video and audio commentary.
You understand the markets and trade with confidence. Learn more at our website here: https://bit.ly/2HFykNd
-----
We have a question from a new subscriber asking about yesterday’s sell off in precious metals, asking how we are able to stay so calm when these big shifts happen in the market and whether there are any tips we can give to help them cope with these types of moves, whether trading them or just staying on the side lines with FOMO.
Thanks for the question I think it’s a great question to ask, but there is one part that can be a bit of a false assumption, and that is that we are always calm when these types of moves occur, even though we are use to big and fast moves because we’ve seen them happen so many times before, there are still plenty of times when moves occur that catches us off guard as analysts, if that didn’t happen it wouldn’t be financial markets that’s for sure.
So, just because we might come across as completely numb some of these moves do surprise us as well, make no mistake about that, at the end of the day we are human beings with emotions right, so whether you’re a trader or analyst of economist some of these occurrences like yesterday’s gold rout was surprising, and if there is someone out there that says they predicted that Gold would fall by almost 6% yesterday I would sign up to learn from them if they can show me what process they used to know that would happen, that’s also why it’s important not to get carried away by some of the fintwit personalities that are always bragging about buying every bottom or selling every top.
I’ve been able to buy a few dips and sell a few tops in my trading, but I can assure you that there was some manner of luck associated with those moves, yes of course we do our analysis and we want to convince ourselves that we were just so very clever to sell at the exact right time, but it doesn’t always happen that way.
But coming to yesterday, I think the one thing that yesterday’s move can teach and show us, is that after the covid-19 financial crash, the amount of FOMO among traders and investors have really shot up, and that has caused a lot of excess leverage in the system.
And I think the move yesterday shows us, that if a very small 5 or 7 basis point climb in US 10-year yields causes Gold prices to fall almost 6%, that points to massive over-leveraging. Can you imagine what markets will look like if we get another shock to the markets, I mean another devasting shock, can you imagine what a large scale deleveraging will look like throughout the markets?
Now of course, there was other reasons for the downside that exacerbated the move, stretched positioning to the upside for gold and downside for the Dollar, and as stop losses are triggered it can have that type of acceleration as traders capitulate and dump their positions.
But, again, even though those things were part of the reason for the downside, the size and speed tells us something about the type of leverage in the system right now.
Now, having traded through a couple of days like yesterday you do get used to it, but I would lie to say you will reach a point where nothing surprises you, then you’re either a robot or probably your emotions aren’t working properly.
But all jokes aside, I think experience goes a long way with days like yesterday, but even if you go through 50 days like that, there will always be something that surprises you.
So, my tip would be to just keep at it every day, spend time in the markets, go back to some prior example of big moving days, even if it’s three of 6 years back. Go find those massive moving days in particular asset classes and go see what sparked the move, obviously there will be many reasons why things move, as was yesterday, but mostly there will be good lessons to learn from history.
Apart from that, I know it sounds silly, but try to keep yourself calm.
Taking a step back and just looking at the markets from a more objective view can be quite helpful in times like that.
-----
If you find this content helpful, you’ll love Forex Source.
There’s a link below were you can learn more about it
https://bit.ly/2HFykNd
