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Ask Your Advocate: Help Me Before My Account Blows Up

19 Years ago | May 12, 2015 11/27/22, 12:00 AM

Ask Your Advocate; I am relatively new to trading and have been one step behind the markets. Lately, when I sell the market seems to buy and when I buy the market seems to sell. Even when I am right the volatility more often than not is taking out my stops. Can you help before I have nothing left in my account?

Your Advocate Says: Trading is easier (it is never easy) when there are trends and momentum. When markets transition from one theme to another, it becomes more difficult and you need to get in touch with what is driving the price action.

This is the case currently where the one-sided consensus trades, short EURUSD for parity, long Eurozone bonds due to ECB QE (bund yields going to negative for most of the curve) have been re-evaluated and squeezed. This has been compounded by bouts of liquidity issues, most notably in bonds, which has seen some extreme volatility and impacted other markets.

This is an issue for those who just look at charts as you can get blindsided by news (e.g. UK election) or when the market focus changes. Take the current market where the focus has shifted to rising global bond yields. This has seen the EURUSD firm on the back of rising bund yields and forced forex (and other) traders to become bond watchers (see Video: Forex Trading Outlook for the Week Ahead). I am not saying to ignore charts but to be aware of what is driving the price action.

In any case, the forex volatility has increased and you need to take this into account where you place your stops. If you decide to use wider stops, then reduce your leverage to maintain the amount of risk you are willing to take. If you keep calling the market wrong, then step back and reassess your trading approach. Stay in touch with what is driving the market price action and be quick to adjust if new factors come into play. This is what I mean by going beyond just charts.

One way to do this is by signing up for our beta test for our EA, My Trading Evaluator. This will give you a tool to evaluate your trading performance and to adjust your goals if necessary to produce a positive result. 

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