Last week we were talking about a potential for a larger correction, which we then saw early this week with some of the worst action we’ve seen in years. Later in the week however the market bounced back and all of the sudden, we found ourselves sitting at only small losses for the week. It’s been a rollercoaster type week in the markets and the question that remains is; what next? What should we expect? How should we trade in lieu of this type of environment? I want to share with you 8 points that I am going to be trying to do this next week and for the foreseeable future. This should help those who are curious how to trade or act during a market environment such as this one.
- Take your time. With added volatility, the temptation to rush into trades becomes greater and the fear of missing out is strong.
- Know your strategy. Review your rules. We have rules for a reason and one of those is so you can know when you are wrong, if you don’t know this, given enough time, you’ll lose your money.
- Don’t swing trade. Volatility is not conducive for swing trading, the market whips back and forth and doesn’t trend. Without a trending market, swing trading is made much more difficult.
- Day trade, if that’s your thing. In light of the previous point, day trading is good strategy to take up when the market volatility increases like it is.
- Again, patience. The charts are broken. They are not healthy right now and won’t be for quite some time. Just because we saw a bounce later in the week does not mean everything is fine and we’re back to normal. The price is still below the major moving averages and the damage to the “cleanness” of the charts is immense.
- Don’t guess the end. I don’t know when the market is going to be back to “normal”, no one does. Stick to your rules and process and you’ll be fine and won’t have to worry about when the market is going to be normal again.
- Learn. This is a great chance to learn more about yourself and trading itself.
- Go for a run. Relax. Think more, not less. But this is more of something you should do all the time.