There has been conflict in the Middle East, so I wanted to talk about how I trade through it. I have been trading for four years, and in that time we have had wars and the COVID-19 pandemic.
These events are sudden, unexpected, and they hit the market hard. This is the time to be calmer than ever, and the first thing I do is pray for the safety of people in the countries affected.
Key takeaways
Before you think about gold or any trade, pray for the safety of the people in the countries being hit, because seeing an event and rushing to sell is cold.
Right when an event happens the market is trying to find itself, so it is usually best to wait rather than trade into that first wave of volatility.
On a daily, four hour and one hour basis support and resistance become far less reliable, and only weekly or monthly levels really hold weight.
Reduce the amount you put behind each trade and accept there is a higher chance of losing it in conditions this volatile.
Normal stop losses get hit by the huge swings and then price snaps back, so give the trade more room.
Anger is the emotion to control here, because chasing a loss in these conditions can cost you a lot and even blow your account.
Why these markets are so hard to read
Retail traders do not all trade the same. Some are profitable, some have no idea what they are doing, so some are buying while others are selling at the same time.
The same is true higher up. Hedge funds and banks do not trade identically either, because if they did there would be no volatility at all.
In practice, even the big players are confused when these events land. That is why it pays to wait a little and let the market settle on a direction before you do anything.
“Right when they happen, it is best to wait a bit and let the market find its direction.”
How to trade it if you must
If you really want to trade this, the best approach is scalping. You will not be able to swing trade these events with any reliability.
Accept that technical analysis is mostly out the window. It is fundamentals and news driving things now, and a lot of your usual levels will simply break.
Overall, reduce your risk in two ways. First, lower the amount you put on each trade, and second, widen your stop losses so the big spikes do not knock you out before price recovers.
The emotion that will hurt you most
Emotions come into play far more in these conditions, and the big one is anger. You are probably going to take a loss at some point this week.
That said, if you make a loss, remember it is normal. The market is not against you, even though that is exactly the thought that creeps in.
Where there is risk there is reward in equal measure. You can make a lot of profit here, but you can lose just as much, so cutting your overall risk is the smart move.
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