If you trade long enough you will come across many types of markets.
There are slow markets. There are fast markets.
Then there are rollercoaster markets!
I use to always dread the rollercoaster market the most.
It’s because in rollercoaster markets, it’s so easy for me to get stopped out of trades.
In rollercoaster markets stock prices might yo-yo from extreme highs to extreme lows.
How do I approach volatile markets?
The first part of the process for me is ACCEPTANCE.
When the market becomes wild, behind it is often widespread panic and confusion.
Many people can’t believe (or accept) the volatility confronting them.
I try my best to accept what is happening. I try to accept that the market is emotional. I try to accept the horrible fact that my current trading strategy may not be working for me.
Once I accept reality, the next phase is deciding whether or not to take action.
This is up to me.
I can decide whether I’m going to form a trading plan and trade the rollercoaster in front of me.
Or alternatively, I can choose to sit it out. I would tell myself there is no shame in sitting it out. If I sit it out I might simply wait for the market to stabilise.
When markets become wild, my approach is to firstly accept that the market is volatile, and then I can decide whether to trade it or just sit it out.