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Trading Strategies Posted by Team Topstep August 19, 2021

10 Ways to Navigate Uncertain Markets

Navigating Markets

There Are Ways To Deal With Fear And Uncertainty

With the current circumstances in Afghanistan, global attention once again turns to geopolitical events. As traders, this can sometimes be frustrating while throwing off the rhythm of our traded markets. As a result, some traders have voiced concern about the best ways to navigate markets during times of fear. 

My trading career began as an intern in March of 2003, the week that Operation Iraqi Freedom launched, in what analysts expected to be a concerning time for the markets. Still, at that time, volatility seemed to decrease. 

Fast forward to 2008. I recall September 29th very well, when most people assumed that the U.S. House of Representatives would pass the bank bailout bill, what later became known as TARP. But, as the votes tallied, the result wavered from confidence to uncertainty and eventually to failure, leading to extreme volatility. 

In more recent years, the Brexit vote in June of 2016 caused severe panic, as well as the U.S. Presidential election of 2016. Most recently, in 2020, the surge in fear and volatility was prompted by the outbreak of COVID19.

The reality is that hardly any markets are exempt from times of fear. Yes, the stock markets often illustrate panic, but so do currencies as well. And, of course, commodities like gold and crude oil are no exception, and even a less traded market like soybeans becomes affected by global events.

Today, I want to highlight ten ways traders can navigate challenging, volatile, and perhaps fearful times. 

10 Ways to Navigate Uncertain Markets


The first assertion is a principle that may not be found in economic textbooks but comes from years of experience. That being, markets tend to adapt to the environments. In fact, in recent years, markets adapt quicker than ever. For instance, look at COVID19 in 2020, which prompted historical volatility, but the markets adapted quickly, far before the pandemic hit the 2020 peak.


Secondly, markets tend to detach from fundamentals at any given time. Again, this is an observation that you are unlikely to find in an economic textbook, but it is all too real. Frankly, as markets adapt, sometimes it may take a month. Other times it takes less than an hour. Whatever the case may be, one cannot trade fundamentals alone. What is necessary is to have the momentum and technical precision behind a fundamental move. Markets do as they please, and sometimes it goes against the theory.


This brings me to my third point, which is momentum. If you are looking for a way to trade during times of panic, fear, and volatility, then go with the momentum. These are times when it’s all the more challenging to be a reversal hero, and it becomes too easy to blow up an account. So go with the trend, regardless of the fundamentals. Furthermore, don’t fall in love with market direction. I heard someone say one time to trade like a mercenary, be willing to change sides frequently if it makes more money.


Expand or narrow your charts. During times of volatility, if you are used to trading very short term, began to look at longer-term charts to get a feel for what’s happening. Likewise, if you trade longer-term charts, whatever that may be to you, then look at a more micro picture. Expanding your charts means expanding your perception.


Consider remaining on the sidelines. Sure, nobody wants to be flat during times of volatility. Yes, we all want to jump on the train and ride. However, if you are uncertain or feeling panic, greed, or fear, it may be best to sit on the sidelines and wait. Unfortunately, this is a lesson most traders learn the hard way during times of heightened volatility.


Use a stop loss. Now, you must determine the appropriate stop loss for your responsible risk appetite and trading style. However, markets can change suddenly in volatility, leaving you to negotiate with positions that go against you. Frankly, we may be able to trade without a stop during normal times because our minds have time to process the data. However, in fast-moving markets, our brains can hardly time entries, don’t try to overwork your brain trying to think of a stop loss during those events.


Remember the psychology of trading. First, trading is all about confidence. Sure, there are times when false belief costs us. However, a lack of confidence is also detrimental. So if you are having confidence problems in these markets, the best thing to do is trade smaller or avoid trading altogether.


Remember, fear is a good thing. In all the talk of fear and greed, something gets lost, that being they are very natural. Fear and greed are very fundamental to the nature of any lifeform, including plants and animals. Fear is a protector and is supposed to keep us out of danger. You can listen to yourself. If you are afraid, then it’s time to think twice about your market involvement.


Don’t be greedy. The flip side of fear is greed. Again, this is a very natural part of survival. However, you may earn an uptick of profit during times of profitability and become greedy, and that could potentially be your demise. How do you know when you are greedy? When hitting your existing goals is no longer good enough, you feel that you must do more to be successful. Yes, that’s greed, and it’s alright if you are keeping it slow and steady. However, if you have a big winning day and believe that the next day you must hit the same stride that far surpassed your realistic capabilities and averages, the chances are that you are on a path where you will overextend yourself.


Have some source for community and interaction. We all need to reflect out loud and bounce our views and opinions of other people hoping for healthy and critical feedback. Likewise, we need to be exposed to different points of view and continue to grow. It’s near impossible to do this when isolated from others. Use other traders as a means of support during these times. No matter who you are or how successful you may be, there remains someone who knows something you don’t.

What’s Your Method For Dealing With Uncertainty?

These are just ten of the ways traders may respond to uncertain times. Perhaps you have other ways to share or may have questions or feedback concerning this article. Maybe you have example stories of how you triumphed or failed and learned lessons during times of market panic. Please feel free to share your thoughts with us, and until next time, trade well!