Trader Mindset When your understanding of the markets is wrong
Aug 5, 2024
Explore the critical role of risk management when navigating market volatility. Learn effective strategies that outshine mere speculation, with insights on using options wisely. Emotional intelligence takes center stage, illustrating how a disciplined mindset can sharpen trading decisions. Delve into the nuances of understanding market behaviors and how to adapt your strategies accordingly.
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Focus on Managing Risk
- Knowing exactly who is selling stocks during major market moves is less important than having protective stops.
- Managing risk effectively matters more than understanding market participant identity.
Position Size by Volatility
- Use daily ATR for volatility measurement instead of intraday ATR for better position sizing.
- Position size should inversely relate to volatility to keep your risk constant.
Using Options for Risk Control
- Michael Martin uses put options for short positions to control maximum loss without watching the market constantly.
- Learning options was not possible for him earlier due to time constraints but now it's a key risk management tool.