Ability to Endure Market Volatility

Know when to stay on course over an extended period of time

The degree of difficulty to identify a potentially good trade setup may take time to develop. And market orientation of most traders nowadays are focused on what the market presents its face value that can best be taken into account for a good trade. This is where we define the 'power & ability to endure market volatility by measuring up trade positions. Especially so, when it is already at the right directional trend of the market. 

Often times, the market is successfully wagging the dog's tail, so to speak with various trade setups distinct from one another especially in the foreign exchange market. Making it more important to properly decipher which of the currency pairs would be subjected to the next big move.

Although, this process can be managed by paying close attention to the 'Sequence of Alternating Price Movement' that clearly reflects the most prominent fundamentally motivated event risk which would take place. Whereas most traders and investors normally anticipate to a point of speculating the directional probability of the market before and after such event.

Most Swing traders prefer to trade on a short tether time frame where price actions can be managed well. Day trades are commonly acceptable especially for main-street investors as some trades are mostly speculative in nature. Besides the level of risk appetite and tolerance are the main reasons why most main street investors and traders are only willing to take in exchange for a probable gain. It really boils down to account size and by definition the type of risk investor / traders that are willing to participate in these volatile market conditions.

The 'level of risk tolerance' would first come from technical price parameters and/or trading range based from certain price change as a point of reference. Risk management prinicples are practiced while setting up price levels as guidelines in the execution of a trading plan. There will always be room for adjustments; where market flexibility should be well adaptable to conditions as well.  

The least common denominator between main-street investors and high frequency traders that trade in volume is their willingness to absorb an incremental gain and/or loss with a defined figure in their trade plan. The frequency to trade and spread positions at risk are commonly made at times, without the consideration of correlation.

The frequency to trade and risk spreading trade positions with several currency pairs can sometimes be attributed to the fact that traders tend to get carried away and use larger leverage amounts in an attempt to gain more and end-up having an unbalanced trade positions that eats up good trades. Thus leaving investor / traders to take gains too early and manage the risk while hanging on by the thread of a lossing position.  

More often, traders' eagerness to re-position especially after a loss in the market may well have the same negative result; as the emotional factor of getting even takes place. One of the biggest and common mistakes that should be avoided. This can also be defined by other traders as a zero-sum trade-game that may eventually lead to a negative balance on the investors portfolio when not properly managed with risk management principles and timed strategies.

Trade setups presents itself particularly well when viewing multiple time-frames which can lead to trading one after the other, thus increases the viable risk of loss rather than gain. However, one of the best practises coming from a positive trade is a well timed execution of a re-position that has a better price entry from it liquidation / settlement price that would serve as a continuationof the original position. The strategy is based on one of the principles of position trading that follows a sequential trade thereafter and more often with two to three correlated instruments or currency pairs.

On the other hand, when all these are managed with appropriate strategies, the rewards would outweigh the risks of loss for as long as certain layers of cushion are in place. Considering market conditions and by keeping a close monitoring of risk events taking place and unexpected price swings that may be considered detrimental to any trade position should always be part of the trade rountine. This includes keeping track of established price parameters which are important, as it affects the trade plan and the levels of risk tolerance for every trade.

And with these methods, the probability of maintaining trade position that is in line with the market's directional trend which can be maximized to its full potential run. Giving investor / traders the benefit of staying with the right trade position and weather the storm of price volatility.