How To Know When To Slow It Down As A Trader

We've all had our share of ups and downs if we are full-time traders in the stock market.  Whether you trade stocks, options, commodities, bitcoin or some other asset class you've had your good and bad days.  Those good days pile up sometimes and I swear it seems like we can't miss.  Even a trade that should lose suddenly turns to breakeven or maybe even a winner.  Feels like a basketball player who can shoot from anywhere on the court and make a basket.  

We have the wind at our back, we want to keep it going - building our accounts and hopefully beating the market indices.  But what happens when things don't go so well?  We recently saw some heavy volatility that put the markets in a vice grip.  Now, it's said that volatility is a trader's best friend, and that huge opportunities arise from others' misfortune.  

 

But that isn't always the case, and as regular traders might understand a trending market is much easier to navigate.  Rising volatility simply means range expansion.  What might have been a tight range for the market suddenly explodes wider, and with it, your account implodes if you're not careful.  

 

During this time we can lose plenty of our risk capital. In several years of trading, I've just about seen it all, but the saddest stories are the ones where traders lost it all by simply breaking a few rules. Now, let's remember that none of us is perfect.  We tend to bend rules or even break them from time to time. Is that worth punishment? In some cases, yes, but when things are not going well it's probably best to just take a break or slow down your trading, and not continue to break your rules. 

 

Remember, trading is about taking risk and the style of which you choose.  Nobody has an iron-clad, foolproof method to make money in markets over the long term.  But if survival is the name of the game, shouldn't we show some discipline when things are not going well?  To recognize that situation is more than 50% of the solution.  The other half is stepping back, slowing down, and recovering.  The market will always be there, just make sure you are there with it, too.