Managing risk of unpredictable, abrupt tweets that cause volcanic reversal action

Discussion in 'Risk Management' started by learner88, Aug 26, 2019.

  1. Recently, there is a new phenomenon in the markets. Unpredictable, abrupt tweets can come out of nowhere that cause financial markets to make volcanic reversal action.

    Someone very powerful up there flip flops unpredictably. One moment he says "They want to make a deal." Next moment, he throws a tantrum and tweets he wants to impose tariffs. Recently, this powerful force even threatened to impose a state of emergency to force American companies to stop dealing with China. Sometimes, he says he gets along well with China and the great leader of China is his friend. Sometimes, this friend becomes his enemy. Lately, he compares Fed Chairman with his China enemy and asks who is the worse enemy of U.S?

    Totally mind-boggling. I am at a serious loss and have lost much money due to this flip-flopping force of nature. This president whips and saws traders.

    How do you manage this kind of risk that seem like lightning strikes out of nowhere? Can the elitetraders please advise? Thank you very much.
     
    TommyR likes this.
  2. tomorton

    tomorton

    I am currently 100% in forex. Ordinarily I would also be trading the Dow index, gold, oil and maybe some stocks - forex would have made up about 60% of what I was doing most of the time. But the risk right now is just too high as the TA is so regularly invalidated.

    Even in forex I have had to widen initial stop-losses, stop pyramiding and pull in take profit signals(but that might as much down to Brexit as any other factors).
     
  3. Robert Morse

    Robert Morse Sponsor

    It would help us make suggestions if you were to share the asset classes you trade and your general strategy and time frame. Maybe a sample position you have taken that you want to hold for days or longer, that you want hedged.

    Yes the President has created a great amount of uncertainty. With uncertainty comes risk and opportunity.
     
  4. Adapting your strategy to the current market condition? How do you know that such a strategy works?
     
  5. tomorton

    tomorton


    Immediate reversion to profit-making instead of loss-making (on monthly basis).

    But I'm sure there are other responses to changing market conditions.
     
    Peter8519 likes this.
  6. I'm just hoping the Sith Lord wakes up on the right side of the bed, or planet or whatever.
     
  7. Could I ask why 100% focus on forex and abandon the rest? What makes forex safer from the President?
     
    TommyR likes this.
  8. I trade stocks and hold them for days to weeks. I try to follow trends and have been getting whip-sawed lately due to powerful tweets from the most powerful man in the world. I don't do hedging.
     
  9. Robert Morse

    Robert Morse Sponsor

    Buying ITM calls might limit your losses but help you stay with your positions. Just don't overlever. Hold the same Delta.
     
  10. tomorton

    tomorton


    Just from observation and experience with live trades it has showed itself less prone to sudden tweet-based reversals, and the counter-trend moves which do occur then are less significant and damaging - at least to my positions. Accepting that this might be a result partly because of the trade set-ups and sizes I utilise so I can't say with certainty that the focus on forex would work for everyone else in every one of their situations.
     
    #10     Aug 26, 2019