Jurassic Park is one of my favorite movies of all time, and one of the best moments is when Samuel L. Jackson’s character, who’s trying to reset the park’s computer system, turns to everyone as he hovers over the final switch and says, “Hold onto your butts.”
Regarding these markets, I think that motto will be helpful!
The broad market took a serious nosedive yesterday, especially in tech/AI stocks. There’s a bit of recovery today, but I expect volatility to remain somewhat elevated over the coming weeks.
We’ve got political developments following the recent elections, the holiday season unfolding, and a Fed meeting coming up, with today’s strong jobs report adding another consideration for interest rate expectations.
So today, I want to share three tips to better navigate volatility in your trading.
We’re not throwing out the trading plan. We’re making some adjustments to how we approach our trading, starting with our expectations.
1. Revisit Your Profit Goals
If you have a trading plan (and if you don’t, I can help you with that in my First 40 Trading Club or via a one-on-one coaching session together), you probably have an amount of money you’re trying to make per trade to grow your account steadily.
This could be over the course of a day if you’re a day trader, or a week if you’re a swing trader, etc.
What I would recommend in a volatile market situation is that you start to revisit what 50% of that per trade goal would look like.
I’m not saying to take less profit on every trade just because the markets may be shaky. I’m saying to start paying attention to your trades much sooner than simply waiting for a profit target to be hit.
Start being a little more vigilant about maybe trailing your stop or setting alerts when you’re halfway toward your goal, whatever that is.
For example, I’m aiming to make $500 to $1,000 in under two hours of trading when I sit down in front of the ES futures.
So now, I’m going to start paying a little closer attention when a trade reaches a $250 potential profit.
It doesn’t mean I’m going to get out, but I’m going to be quicker to capture wins if needed, especially if the direction changes.
2. Review, Review, Review!
It’s going to be more important than ever, if the markets continue to be volatile, that after you complete a trade, you have a process to review it.
It doesn’t need to be right away. In fact, there’s value in doing it twice.
The first time is immediately after you close the trade. Quickly look at how you acted versus your trading plan, and obviously whether it was a win or a loss.
The second time is at regular intervals, say weekly or monthly, where you look at all the trades you made during a certain period and start to see where you’re landing.
Is one particular setup in your plan producing better trades? Is another setup harder for you to manage and maybe should be minimized in your plan?
This is the information you’ll be able to glean, but only if you review.
For example, I tend to review my ES futures trades weekly on Sunday. But now I’m going to add an additional checkpoint, maybe on a Wednesday, so that I’m really staying attuned to how things are going.
Just giving you examples here of what I would do with my trading. Obviously, you should translate to yours.
3. Hone In on Your Support and Resistance Levels
Now, the biggest thing of all is to really hone in on your support and resistance levels.
If you’re following anything I do, whether it’s price action, market timing, or momentum, for example, in my Advanced RSI Power Zones System, it all comes back to the candlesticks on the chart.
You’re looking at whether your security is violating a support price floor or trading above a resistance ceiling.
For example, here’s that down move in the Nasdaq I was talking about, shown through the Invesco QQQ ETF.
Yesterday looks really fugly. I mean, there’s no other word for it!
But when you compare it to the price action prior, QQQ broke below the July 29 low at 661.14. It hasn’t yet stayed below that level for a couple of days.
We don’t know how today’s session is going to shake out. We’re only halfway through as I post this blog.
But we very well could see a recovery back above that July 29 level at 661.14 to finish out the week, which would give a little bit more of a sense that short-term bulls may extend their recovery over the next session or two.
Volatility, which reflects how quickly and significantly a market’s price moves, is always present. Sometimes it’s low, and sometimes it’s high.
So if we do continue to see elevated volatility or more frequent spikes, these are my tips for navigating your trading so that you can still work toward your goals, manage your risk, and minimize how much you get caught up in the chop.
👉 PS — We’ve Got Archives!
Hima has shared A LOT about this week’s election in relation to the markets.
Recent HimaReddy Blog Archives:
- Nov 5th: Understanding Jobs Data: What Traders Need to Know
- Nov 4th: S&P 500 Futures After Democratic Wins
- Nov 3rd: What Happens to the Stock Market After Midterm Elections?
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