Thursday, 26 November 2015


Holy crap the markets have been volatile of late! At the time of writing this my chosen index the ASX200 has taken a huge beating over the last couple of weeks. Peaking at 5410 in late October to dropping like a ton of bricks to 4976 a couple of weeks later ... Then rallying for 5 days and making 300 of those points back and then flailing around around like a dying fish for the next week. That equates to a range of 434 points from top to bottom, It also equates to a few headaches for me and a LOT of beers consumed to help calm the nerves. What is going on? Who the hell knows? Bloombergs doesn't .... no other stock site I subscribe to has any idea whats going on...... and quite frankly neither do I. Unfortunately fear is ruling the market as I write this and how the f--k do we cope with these trading conditions? Here's my thoughts, ideas and practices on the matter:

My trading strategy (with the amount of money I had in there at the time)  really only allowed me to trade with a range of 350 points. Obviously this creates a problem and means I would have gotten sold out if I had not employed a range of strategies to counteract this fall.

Looking at the graph at the peak, you'll notice the huge gains the market made on the right before the drop began. I felt this was unusually high. Lets say I was trading 3 x lots of ASX200 with each position I took out, but i had a feeling that high was an artifical high and stripped my trades back to 1 x position for the first few trades , then up to 2 x positions and the 3 x positions so that if/when the markets fell over I would not be trailing losses on x2 or x3  positions all the way down to the bottom of the market. This provided some very useful padding

I took out sell positions against my buys so I was making money on market fluctuations in both directions my idea was to take out 1 sell every 20 points apart at the top of the market and 1 buy 20 points apart and later 2 x buys  when the market dropped a little this meant I was making money a little faster and added to my trading fund a little faster and gave me yet more padding to ride the wave down. This works well in normal market conditions and serves to help buffer your trading fund with a little extra cash in case  a big sell off occurs, but realistically it does  it NOT prepare you for a really big sell off, but it is still useful.

When it became painfully obvious that the big sell off was imminent (this is partly gut feeling / experience / news reports showing fear in the market) I took out more sell positions to counteract my buy positions. Not too many more so that if the sell off didn't occur I would be in a lot of trouble but enough that I could profit off the falling markets and keep my own positions secure. I then let the markets sell off that next day and closed off some profitable positions to boost my own cash reserves and hedge the bets in case it did go back up and put profitable sell orders on others in case of a reversal meaning i wouldn't get caught with a bunch of sells at the wrong end of the market in the event of a sudden reversal



With IG markets if you are trading both ways it is of the utmost importance to press the "force trade:" box on the trade screen right before you execute the trade otherwise your trade will cancel out an existing trade and invariably this will result in a  postion being closed at a loss (usually a big loss)  Ring your provider whether you are with IG markets or someone else about this and make sure you know how trading both ways works, IT IS ONE OF THE MOST IMPORTANT THING YOU NEED TO KNOW

Again, this does not mean you will survive a big fall but it does increase the odds of you surviving such a fall. Employing these strategies is how I survived he last fall. I WOULD have been closed out for sure.

I don't think things are going to quieten down anytime soon either.

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