The past 2 weeks we have seen our markets in the US and markets abroad shaken up due to Russia invading Ukraine. Now before we get started with this weeks blog we would like to say those who are/will be effected by Russia invading Ukraine are in our thoughts and prayers.
Trading during any sort of war/conflict can be very tricky. This current conflict is not any different. We've seen price shoot in one direction or another all due to a few words or actions. Now the big question is, "how do we trade this". The answer to that is a two part question.
Number one, you don't trade. If you have no clear edge or price is all over the board it would be best advised not to trade. Now this is not what many want to hear but its the truth. Remember trading is all about conserving capital and if you run out of capital, you can't trade.
Additionally if you have never traded in this type of environment, it is advised to test your system out in SIM before proceeding. This way you know how big of a stop or how big of a take profit level you can use.
Number two, you have to be very selective. You will most likely see tons of entry signals. The problem with this is, a lot of them are going to be fake outs due to all the volatility. Not only that but with increased volatility we can see price violent shoot in one direction and then reverse and go the other way. This type of movement will lead many traders to get stop out prematurely.
One of the ways to fight this is to drop your contract size and increase your stoploss. Before doing this be sure you have back tested and proved that this will work.
By increasing your stop size you are still risking the same amount or even less but now you are giving your trades a bit more room to work out.
Additionally it would be advised to keep a news source up. We use FinancialJuice for our streams and morning analysis. It would also be smart to avoid trading when there are meetings/news releases that are in regards to the conflict.
At the end of the day it all boils down to reducing risk. Keep and eye on the news and trade smart! Good luck.