How You Can Sharpen Your Trading Skills With EdgeClear This Volatile Election Year

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By Gerelyn Terzo, Benzinga

The financial markets have been more volatile than ever of late, taking investors and traders alike on a wild ride. Whether it’s a technical glitch on the New York Stock Exchange triggering a delay in sensitive market data, bullish expectations around artificial intelligence (AI) or a sudden pivot in the Federal Reserve’s monetary policy, the markets have a way of surprising even the most sophisticated of traders.

On the first trading day in June, the CBOE Volatility Index (VIX), which is used as a barometer of fear among investors, soared by 8%. CFRA Chief Investment Strategist Sam Stovall warned that market volatility may increase before stabilizing, as worries about the fate of interest rates overshadow the excitement around AI technology. This being an election year further adds to market volatility.

No markets have been left unscathed from the whiplash volatility — from stocks to futures to commodities and cryptocurrencies. This has resulted in an unpredictable environment in which steady hands are required.

Most traders have established some degree of trade discipline, which is crucial in these uncertain times. Without it, responding to every piece of data or market sentiment shift would be unsustainable.

However, in the current environment, it’s critical for online traders, whose longevity often depends on analyzing price patterns to improve their performance. With market volatility unlikely to ease anytime soon, the time to do this is now.

Ways To Improve Trade Discipline

As it sounds, trade discipline involves a set of rules by which a trader abides regardless of what’s going on in or around them. It represents an ability to stay calm, cool and collected even in turbulent markets, avoiding the temptation to allow emotions to guide decision-making.

No trader is perfect, and there will always be certain unknowns threatening to rear their heads. But sticking to a regimented course daily will help traders navigate the intricacies of trades over which they can exert some control.

One way to do this is by utilizing analytical software that generates statistics on your trading style. EdgeClear, a Chicago-based futures broker, developed an analytical tool that traders can use for FREE. EdgeWatch is like having your own personal trading analyst by your side, says EdgeClear. The software solution is a dedicated analytics companion that helps traders harness actionable insights to elevate their results. Statistics such as how much you gained at every hour of the day, day of the week, expectancy for each trade and more can help fine-tune your trading style.

Bear in mind, no two trading disciplines are exactly alike, as each one will be influenced by factors such as the instrument type, amount of capital, personal style and other factors. Then there are other nuances like a market’s liquidity, volatility or the amount of fear or greed that’s present at any given time.

Nevertheless, there are some common themes by which commodity and futures traders can abide by. The most successful traders maintain agility so that they can tweak their trade discipline as market conditions and cycles warrant, increasing their success rate along the way.

Playing Offense And Defense

First and foremost, traders should reassess the lay of the land in the markets every day. This involves researching the latest headlines as well as the recent historical performance of the market in which they are trading. Traders should put on their analyst hats to forecast how certain markets or instruments would respond in hypothetical scenarios. As a result, they’ll be better equipped to respond accurately in real-life situations.

Additionally, a trader must enter the trading day with a risk capital threshold, reflecting the amount of money they’re willing to lose. While no trader enters a position with the intention to lose money, there’s no way to avoid it 100% of the time. Establishing a daily loss limit is a strategic way to defend against market volatility, though it’s important to note that loss limits do not always execute perfectly and are not a foolproof method of limiting losses.

Benzinga discussed customer risk capital thresholds with EdgeClear. They informed us about their capability to set auto liquidations on customer accounts. They also mentioned that multiple data providers, including Rithmic and Teton, offer the ability to establish various types of auto-liquidation thresholds. Once these thresholds are reached, positions are automatically liquidated, and the account can be locked for the rest of the trading day.

By the same token, traders would never make a dime if they didn’t also implement an offensive strategy. As a result, it’s important to establish a daily profit goal. One may wonder, “Why would I set a limit on the amount I can profit in a day?” Given the unpredictable nature of the markets, it is important to navigate the ups and downs to your advantage. This way, when the amount is hit, the trader can step back, review their steps, rinse and repeat. As such, they can then take the win, avoid the temptation to go for broke and feel free to adjust the daily profit goal as their successes increase.

Emotional Discipline

Emotions have the potential to play a huge role in trading futures or any instruments, for that matter. Online trading involves making split-second decisions that may involve large sums of capital, increasing the chances for fear or greed to override any logic that is needed for the trade. By strengthening one’s emotional discipline, a trader increases the likelihood that they will avoid the pitfalls of an emotionally driven trade in either direction.

While it might be impossible to avoid extreme emotions like fear and greed altogether, there is a way to manage them and mitigate their influence. If you let fear dominate, you run the risk of playing it too safe and exiting a position prematurely while leaving profits on the table. On the flip side, too much greed could cause you to miss the big picture, accepting excessive risk that could cause you to lose your shirt on a trade.

The way to manage your emotions harkens back to setting your profit and loss goals for the session and then sticking to those rules throughout the course of the trading day.

Next, it’s important to avoid impulsive behavior while trading. While everyone might come into the trading day with some baggage, you should check that at the door before you make your first trade. Otherwise, you run the risk of trading on impulse rather than strategy.

Again, the presence of goals and targets will help traders avoid making irrational decisions. The more strategy pays off, the more confident you will become in your decision-making process. Traders must be patient with themselves and celebrate each victory, no matter how small. This will help make you more resilient and less likely to be swayed by emotions.

Finally, revisit your mental state throughout the course of the trading day. If any outside influence has seeped in that could throw you off your game, adjust as needed.

It’s important for traders to accept that there will always be uncertainties in the markets, which is why maintaining control over the constants is so important – this includes a trader's state of mind. Fortunately, incorporating EdgeClear’s solutions, tools and resources into your heightened trading discipline could help lead to a more sustainable trading journey – no matter the market conditions.

To learn more about how you can boost your trading discipline, visit EdgeClear’s website.

Featured photo by shijingsjgem on Pixabay.

A forward-thinking futures broker. Led by industry experts who understand the complexities of trading, Edge Clear combines the best of technology, service and risk control.

This post contains sponsored content. This content is for informational purposes only and is not intended to be investing advice. Derivatives trading involves a substantial risk of loss and is not suitable for all investors.