In golf, when you are putting in the wind, you have to widen your stance.
In volatile markets, this rule can be adapted to apply to trading as well. It may seem like strange advice, but in times of extreme volatility, you need to widen your stop-loss points. Most people think you have to do the opposite and tighten them.
Let me explain: When the market is swinging back and forth wildly, movement within a day can knock you out of a position. Then, when the market swings back in the direction you were counting on, you will have been stopped out… and missed the gains you should have had.
It’s frustrating when a trade goes against you. But it is even more frustrating when you are in a trade, get stopped out, and then the trade turns around.
Take my advice and loosen up your stops a little. You still need to set stop-loss points, but when the market is volatile, you want your stops to be nearly impossible to reach within normal market activity. What constitutes “normal” activity keeps changing. What seems normal now would have been considered insane just a few months ago.
[Ed. Note: The market may be volatile, but it still offers plenty of ways to profit. Loosening up your stop-loss points could keep you ready to tackle opportunities as soon as they present themselves. Market analyst Rick Pendergraft has put together an educational program that lays out the simple steps you need to take advantage of these chances to prosper. Not only do you get three months of Rick's best recommendations, you also learn how to make good investment choices yourself. Get the details here.]
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