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In a Volatile Market, How do you Manage your Trades?

How to manage your trades in a Volatile market?

As you are probably aware, Russia and Ukraine are at odds. Every country is using economic sanctions to attempt to stop Russia. The financial market has seen a lot of volatility as a result of this.

Many new traders who have recently entered the market are experiencing their first bouts of volatility. In this article, I’ll walk you through the step-by-step method of managing your trades in such a market to achieve consistent trading success.

Before we go into the details of the procedure, let me emphasise that trading is a serious business, and in this industry, volatility is critical to making money.

There are 3 kinds of participants in the Market:

1). Intraday Traders

2). Swing / Positional traders

3). Investors

For intraday traders:

The good news is that as volatility rises, so does the opportunity to make more money quickly. The bad news is that increased volatility entails increased risk. When volatility rises, you may be able to make a higher-than-average profit, but you also risk losing a larger amount of money in a shorter period of time.

Following the instructions below, one can overcome this and turn it into a golden opportunity.

  • Don’t trade in the first 10 minutes of the market opening since big players will be busy managing their positions in the opening session owing to sudden news flow, and we can expect several violent price spikes in the first 5-10 minutes.
  • Always trade with broader market trends in mind. In volatile markets, the possibilities of the market shifting price moves in one direction are significant, and we don’t want to be caught on the wrong side of the deal.
  • Increase the quantity per trade and widen your stop-loss: It is true that in turbulent markets, the intensity of price changes increases in both directions. We propose expanding your stop loss to avoid getting out of a winning trade due to market volatility. Reduce the quantity because the stop loss has been raised. The purpose of these two modifications is to maintain your overall risk exposure about the same while avoiding being stopped out owing to wider-than-normal intraday price volatility.

For Swing traders:

Because the market is unpredictable as a result of the war, we must be prepared for any unexpected positive or bad news after market hours. If substantial news breaks after market hours, we should expect a large gap up or large gap down the next day.

To manage your swing trades in a volatile market, follow the steps below:

Avoid trading in equities and futures since the risks of making a large loss due to gap opening are greater if you get caught on the wrong side of any trade.

Also, if you do swing trading in equity and the stock hits a lower circuit on the opening the next day, you will not have time to exit and will end up with a large loss.

Trade options with proper hedging: You can profit from this volatility if you hedge your positions properly.There are several methods you can develop in options where you can make 10X to 20X returns on risk, and such setups should be traded exclusively. Even if just 30% of your transactions strike the target, you’ll still make a lot of money.

This method is used by many of our students who trade Nifty and BankNifty.

For Investor:

Our goal as investors is to locate a high-quality company that will develop and perform well in the future, allowing us to build wealth. When the market is unpredictable and each country is threatening economic penalties, it’s critical to remember the following pointers to protect our portfolio:

Avoid stocks or sectors that are immediately affected by economic sanctions. As you are aware, crude oil prices are rising as a result of economic sanctions against Russia, as Russia is the world’s second-largest crude exporter, and no one wants to buy Russian petroleum.

As a result of the overnight decline in crude supplies, crude oil prices have continued to rise. All businesses that rely heavily on crude oil will be affected. So we should avoid them until we have more information on the war.

If you currently own equities that are affected by the economic sanctions, I recommend reshuffling your portfolio and reducing the weighting of these stocks.

Finally, when you come across attractive possibilities, invest in reputable firms. Remember that your business should be successful and fundamentally sound.

Continue to learn and grow.

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