The erratic movement in the market yesterday was like being tossed out on a stormy sea, with no anchor to steady the ship.
As a trader, it can feel as though you have no control over the heavy waves of uncertainty and volatility.
But just like a sailor in the ocean, there are strategies and techniques that can help you navigate the rough waters and regain control in the face of uncertainty.
The market, like the ocean, can be unpredictable and swayed by even the slightest ripple of perceived good or bad news, sending emotional waves crashing through it.
But you can learn to go with the flow and ride the waves…
With my tips to help you adapt to volatile emotions in the markets…
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3 Tips to Help You Adapt
It can be tough to adapt your trading approach when the market seems to go from 100 to 0 overnight.
You’re used to seeing massive percent gainers, hype, volume, and float rotation…
Then you see stocks that meet all the criteria, like Baudax Bio, Inc. (NASDAQ: BXRX) on Tuesday, and First Wave BioPharma, Inc. (NASDAQ: FWBI) yesterday…
Both had news, high volume, float rotation, and a gap up — and they both failed. (Mind you, BXRX at least gave an opportunity for a trade, even though it was interrupted by a halt.)
It can leave you frustrated and ready to pull your hair out. But before you do that and end up looking like me … try these tips to help you be more flexible and ready to adapt…
1. Focus On Entries
When fear is rampant in the market, or stocks aren’t having big follow-through moves, it’s even more important to get good entries.
A good entry can limit your potential losses by getting an entry closer to your risk level. But it can also increase potential profits you can squeeze from the trade.
Focusing on entries can also help you avoid chasing. So really dial in on getting a good entry. Look back at your spreadsheets and see if you can tinker with your existing strategy and improve entries. Or if there are setups with fewer odds you can cut out completely.
2. Take Profits Quickly
When the market is leaning on the fear side of the fear and greed meter, you need to be more nimble. You need to get in and out of trades quickly — whether for a small loss or a gain.
Consider taking profits sooner — when you see a 10%+ gain, lock it in. Match your trade expectations to what the market gives you.
3. Test New Strategies
Patterns and strategies change with the market. Some weeks afternoon plays are on fire, other weeks it’s all about the morning dip and rip.
In the case of BXRX and FWBI, the best opportunities were to go long in premarket. It’s not a time I recommend new traders try out. But if you’re experienced and on a hot streak, try it out…
Play around with different strategies, use a small size or paper trade while you test it out, and track your data so you know what works for you.
Get Bryce Tuohey’s tips for adapting to new markets here.
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Apply to join the SteadyTrade Team here.
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Have a great day everyone! See you back here tomorrow.
Tim Bohen
Lead Trainer, StocksToTrade