Hi all, This is a question directed to experienced traders. Those that have witnessed market reactions to important geopolitical events over the years, several bull and bear markets and that have generally successfully navigated rough waters. I've been trading for 5 years and studying the markets for a lot longer. A lot of hard work and studying has been paying off as my trading improves and knowledge increases. One thing I realized yesterday is that I'm lacking a gameplan when major news or geopolitical events take the markets down. Case in point yesterday. I had entered several positions a few days earlier in solid companies breaking out of cup with handle patterns. A few days in and they were all doing good. As the market bounced off its lows I could see volume and participation was low and decreasing. With everything going on and this extended rally I was cautious and 40% invested. So Friday morning when news broke that the Ukrainians had attacked a Russian armoured column I went into defense. Waited for the news to be confirmed, seeing the DAX come down pretty good, bonds go up.. My instinct was to protect my capital and I liquidated all of my positions. I felt good about that. Things are very unpredictable right now. Until later in the day when I saw the markets come off their lows, once again brushing the bad news aside. I felt like I had been shaken out of good positions. More importantly it's lead me to realize I don't have a gameplan or good enough understanding on how to manage positions in times like these. I'd appreciate learning from you what you've learned over the years. Is it best to wait it out a few days and let the knee jerk reactions settle down? Or at a minimum let the end of day action dictate the best course of action? Or simply get out and observe? We're increasingly in volatile times and looking at the news, it ain't getting better soon. Having such gameplans is key. Thanks in advance!!!! Looking forward to learning from all of you. Sincerely, airbornetrader
I got hit with that yesterday too. A while ago I was hit with a 'takeover' rumor too causing massive gap moves. Mostly for me it was just selling some way OTM options against positions. If I sold them after news broke I could have gotten a better price. So I just had to adjust the hedge to get back to delta neutral. Mostly your question is way too generic to answer anyway. Depends what kinda trading you do. If you are relatively well hedged, you shouldn't be affected anyways since you are hedged. If you are running purely directional plays then it can hurt, or in some cases help your position. But that comes with the territory. I prefer market neutral strategies generally for this reason because there is less headline risk. But market neutral strategies have lower return because of the hedge. It comes with the territory. For you running directional plays, it depends on your ability to read the market in how you react.
So you wanna be an airbornetrader, you wanna live a life of danger?.... Ironically the answer to your questions is within the Ranger cadence. You really should have CORRECTLY predefined stops and profit objectives (the razor). Because the unexpected will happen. At least you won't be kicking yourself, if you stuck to the plan. Hooah?
The positions were long only and entered a few days earlier on the bounce so gains were limited. Profit targets and stops were set but I chose to get out as a precaution. I will look into and consider hedging. The lesson here is that I didn't have a solid gameplan for when I felt there was a possible sudden change in the market due to an event. I really try and avoid knee jerk reactions. Hedging will be a good option, so is having a better plan. I guess I'm looking to hear from traders that when they experienced news driven event that move the markets, if they've found it "generally" a good idea to act relatively fast and assess later. Or let things settle out before acting on position changes. And I mean major events. I've learned to be risk averse, and not afraid to get out when I feel things are wrong. I realize it's a generic question but I like to hear people's opinions. Xandman airborne comes from the fact that I'm a pilot. Although I used to have a more "dangerous" lifestyle, nowadays the action is mostly in the markets. Happy trading!!! And thank you for all the advice and experiences!!!
Chart reading only moderately works on calm days. On days when there are expected headlines or after an unexpected headline hits, all bets are off and the market whip saws. One could also focus on longer term setups for directional plays, and correspondingly set bigger stop ranges. Judging from your description, I'd say you probably did have a plan, and that was your stops (auto or mental). Often times, directional plays are more profitable (if you get the direction right). Nobody likes to hedge if they don't need to.