What do you do when the market has you by the balls?

Your emotional stability may play a very important role in your ability to trade financial securities successfully.  Many of the assets that are traded globally, produce a zero sum game which means that the completion to generate revenue from the capital markets is very robust.  There will be days when the market may go your way, but the majority of the time you may face some adversity, and it is in these situation that it is important to keep your composure.

Stick to your Plan

Having a trading plan may be vital to successful investing. You may have a strategy that has a pre-determined entry price, and risk management that takes the guessing out of your trading.  If you let the market take you out of a position when you are wrong, and it was based on sound analysis, you will not feel like the market has you by the balls.  Instead you may move on to the next trade.

Many traders focus on where to get into a trade, but fail to focus on how much they will risk and where they will take profit.  Having a plan that incorporates all of these factors, may help you avoid trading out of control.

Dealing with your Nerves

A trading plan in theory may help you deal with your nerves, but this is not always the case.  The key is not to become married to a position.  When you fall in love with a position and do not stick to your plan you allow the market to grab you by the balls.  There is no feeling worse than looking at your screen day after day and seeing that the market is moving against you and that you are losing money on your favourite position.  Instead, you may follow a plan, which may allow you to avoid becoming nervous that a position is moving against you.

The Benefit of Trading Options

Another possible way to avoid the market having you by the balls is to trade options which have a pre-determined risk profile.  An option is the right but not the obligation to purchase (or sell) a security at a predetermined price, for a specific expiration date.  The benefit of purchasing options is that your risk is capped at the amount of premium you pay for the option.  Since your risk is pre-defined, you may avoid the market taking hold of your emotions as you have already capped how much you can lose.

Realise it’s a Business

Trading is not life or death, it’s a business.  You are trying to make money, but you will fail many times.  Trades that lose money are part of the process and you should expect that the strategy that you put together will lose at times.  By expecting that you will have losing trades, you will train yourself to be matter of fact about loses, and not create an unwanted scenario where the market has you by the balls.

Risk warning:

Forward Rate Agreements, Options and CFDs (OTC Trading) are leveraged products that carry a substantial risk of loss up to your invested capital and may not be suitable for everyone. Please ensure that you understand fully the risks involved and do not invest money you cannot afford to lose. Our group of companies through its subsidiaries is licensed by the Cyprus Securities & Exchange Commission (Easy Forex Trading Ltd- CySEC, License Number 079/07), which has been passported in the European Union through the MiFID Directive and in Australia by ASIC (Easy Markets Pty Ltd -AFS license No. 246566).