Managing risk of unpredictable, abrupt tweets that cause volcanic reversal action

[Peter8519]

Just from observation and experience with live trades it has showed itself less prone to sudden tweet-based reversals, and the counter-trend moves which do occur then are less significant and damaging - at least to my positions. Accepting that this might be a result partly because of the trade set-ups and sizes I utilise so I can't say with certainty that the focus on forex would work for everyone else in every one of their situations.

 

[Scataphagos]

How do you manage this kind of risk that seem like lightning strikes out of nowhere? Can the elitetraders please advise?

Use TA to buy support and/or sell resistance with a hard stop.

Then when the tweet/news/spew comes into the market.... if it's against your position, you get stopped out... maybe 4-5 ES points? If the event is in favor of your position, you make maybe 20+ points. (Last night's jawboning was worth 80 points.)

You almost have to do it this way as the moves are too swift to "see, then catch"... algos, you know.

 

[notagain]

NQ looks like it'll open above VWAP trend line, NQ should spike down to ring the bell

 

[smallfil]

The stockmarket knows better than the fools who fall for every bit of news they come across with! Fools deserve to lose their monies!

 

[learner88]

Just from observation and experience with live trades it has showed itself less prone to sudden tweet-based reversals, and the counter-trend moves which do occur then are less significant and damaging - at least to my positions. Accepting that this might be a result partly because of the trade set-ups and sizes I utilise so I can't say with certainty that the focus on forex would work for everyone else in every one of their situations.

I think it works for forex because forex makes smaller moves in terms of percentage. It will be a problem if higher leverage is taken.

 

[learner88]

Use TA to buy support and/or sell resistance with a hard stop.

Then when the tweet/news/spew comes into the market.... if it's against your position, you get stopped out... maybe 4-5 ES points? If the event is in favor of your position, you make maybe 20+ points. (Last night's jawboning was worth 80 points.)

You almost have to do it this way as the moves are too swift to "see, then catch"... algos, you know.

I think one has to use a market stop order. The movement can be so fast that it will miss the stop order if it's a stop limit order.

 

[Robert Morse]

I think one has to use a market stop order. The movement can be so fast that it will miss the stop order if it's a stop limit order.

Unfortunately, in my experience, if your time frame is days or more, I find stop orders execute at or near the point you might have added to your position rather than where you would want to liquidate. That is why I like using ITM options.

 

[Scataphagos]

I think one has to use a market stop order. The movement can be so fast that it will miss the stop order if it's a stop limit order.

Agree. You don't want to be "penny wise and pound foolish" when you're playing defense.

Even your stop order may be overshot a bit. Suggest not exposing yourself to a possible "weekend gap" where feasible also.

 

[tomorton]

I think it works for forex because forex makes smaller moves in terms of percentage. It will be a problem if higher leverage is taken.

Agreed on leverage. My highest is 1:20.

 

[Scataphagos]

Agreed on leverage. My highest is 1:20.

A note FWIW...

In my entire trading life, I've rarely had my capital levered even 2:1.