Trading volatile markets is not easy. As uncertainty starts to pile up, it’s natural to look for answers. You want to be confident that you’re making the right trades at the right time.

“Markets are not supposed to move like this,” you quietly whisper. So you start watching, listening and even grabbing for something – anything – to explain the irrational moves. That feeling of desperation leads you down the wrong road, and you end up making massive mistakes.

Let’s avoid that. There’s nothing we can do about the markets. But we can adjust our trading to navigate tough markets.

3 tips for trading volatile markets

Tune out the noise

You have heard me say this a million times, so here’s your one-millionth-and-one reminder: It’s more important than ever to ignore the media when markets are volatile. I can guarantee you that those pundits do not have your best interest at heart. All they care about is ratings and possibly selling you something you don’t need. Turn off the TV.

Pay attention to sentiment indicators

In most cases, sentiment indicators will tell you when momentum is about to turn. The ones that are most helpful are the VIX, put/call ratio, investor surveys, and breadth. Their readings often lead markets, but keep in mind that they are not perfect. However, when a few line up in one direction, you can be more confident in what the markets are going to do next.

Follow price and volume

Price and volume are the king and queen of the indicators. Everything starts and ends with the price. Sweeping in behind price is volume. Where is the money flowing – and how much of it is flowing?

Do these three things, and you can clearly, concisely and objectively read the charts. From there, you can make smart decisions on what to trade and when to do it.

If you do need some guidance when trading volatile markets, I highly recommend joining a chat room. I can’t speak to other chat rooms, but in ours, you will be supported and guided in a welcoming environment by fellow traders. Your skill level doesn’t matter. All that matters is your willingness to learn. Sound interesting? Learn more about our chat room here.

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