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Chapter 29, Part IV. Daily Routine and Disaster Plan. Page 4

Discussion in 'Complete Trading Education- Forex Military School' started by Sive Morten, Dec 27, 2013.

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  1. Sive Morten

    Sive Morten Special Consultant to the FPA

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    6. Unexpected exchange closings or news releases. Here we talk about just devastating cases – such as 9/11 2001, when all exchanges were closed and orders were cancelled. What to do then? The one way is to try to hedge your position on another market with some highly related asset. For instance, stock index futures could be hedged, some currencies and commodities. If this is not the case and market opens at disadvantage – exit as soon as you can. Leave this loss behind and continue – there is nothing that you can do. Remember the proverb: Change what you can, but leave that you can’t. One way somehow be prepared to that is apply volatility of current market to your money management. So, if you apply 3-standard deviation rule, so there is high probability that market will not open worse that 3-deviations of close price. If you will calculate this value and regularly will update it – you may adjust your trading lot so that even this drastic move will not destroy your account and you will survive.

    7. Large gaps and slippage. Sooner or later if you are a position trader you will meet this phenomenon. It could happen that price will open beyond your stop-loss order due to some events or news that could shake the market during weekend. In this case you may try to return at least some part of your losses. Huge gaps very often have a tendency to be closed, so if gap has happened – wait for 20-30 minutes. If market starts to move in your favor – place stop at extreme at opening. After that you can make different decisions – close position at your initial stop-loss order, or trail stop to reduce loss or even try to get some profit. Otherwise – you will be stopped-out at the extreme.

    8. Stress times. In the life of all of us from time to time happens negative periods of high emotional instability and stress. This could be illness, divorce, death of a loved one. During these moments we can’t think absolutely rationally and it’s very easy to loose money during such times. That’s why it’s better to plan ahead – what you will do in such cases. Simple and wise decision – to take a pause in trading. Probably you even could continue to trade, especially if it will give you some psychological relief from “diving into work”, but make trading volumes very tiny.
     
    #1 Sive Morten, Dec 27, 2013
    Lasted edited by : Oct 9, 2016
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