Trading Is Like a Box of Chocolates

The stock indexes have seen some wild swings over the past year and a half. In February 2018 the fear of mounting inflation instigated a big decline. In October 2018 there was another dramatic drop for many reasons, mainly a policy mistake by the Fed, tariff talk and slowing slow global growth. Then in December 2018 stocks took another huge hit. This decline was sparked by almost the same reasons in October, but add in Brexit and a slowdown in the Chinese economy.

Lately, the indexes have been ultra-sensitive to the war on fair trade and intellectual property with China. There have been unprecedented moves outside regular U.S. trading hours. Traders are vulnerable to forces that have had little or no impact in the past. First, fighting for fair trade has not been a major concern by an administration in my 30-plus-year career in the markets. Typically, traders have a schedule of event risk such as economic reports, supply data and earnings. Event risk is fundamental data and fundamentals move markets. Traders can prepare for volatile moves when they know what is on the calendar.

The status quo has changed. Nowadays the media often force their agenda in lieu of vetting. Fact is not a priority, sensationalism is. Social media or tweets frequently impact prices for stocks and commodities. Many reliable strategies suffer when volatility kicks in due to agendas and fake news. So, now more than ever it is imperative to define risk immediately after entering a position in stocks, ETFs and futures. As traders we are vulnerable to unconventional forces and time frames. Trading is like a box of chocolates. Unforeseen events are occurring more often than ever. So, protect your positions before you head to bed.

John Seguin, Market Taker Mentoring

Trader Education