If you’re a full-time trader of stocks, options, commodities, bitcoin or some other asset class, you’ve had your share of good days and bad days. When the good days pile up, it seems like you can do no wrong. Even a trade that is on shaky terrain might break even or turn into a winner. When you hit some bad days, it’s hard to know if this the point when you should step aside and take a break from trading.
Take a break from trading when volatility hits
We recently saw some heavy volatility that put the markets in a vice grip. Now, volatility can be a trader’s best friend. It is possible to find amazing opportunities when fear or greed take hold of the markets. However, a trending market (either up or down) is much easier to navigate.
Rising volatility simply means the range in which prices move has now expanded. Unfortunately, that expansion can easily blow up your account if you’re not careful. I always preach the importance of risk management. When the markets are volatile, it’s especially important to play things carefully. This may mean taking a break from trading.
Take a break when you throw rules out the window
As a full-time trader for many years, I’ve just about seen it all. The stories that stick with me are the ones in which traders lose it all by breaking a few rules. Now, let’s remember that none of us is perfect. We tend to bend or even break rules from time to time. However, when trading is not going well, take a break or slow down your trading. Breaking rules when you’re already feeling panicked will not end well.
No one has an iron clad, foolproof method to make money in markets over the long term. Survival is the name of the game. You’ll survive through sound risk management and having the humility to step back when things aren’t going well. The markets will be there when you’re ready to resume trading.