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Recently there have been a lot of large fast moves in the financial markets, due to the recent stock market crash, and this has also affected the forex markets, so I am going to share the 2 best trading strategies to tackle such situations.

Although they are quite rare in the stock market, such fast moves are actually quite common on the intraday market, and professional day traders who do news trading or intraday trading will be quite familiar with them.

When I was trading professionally, we would see such sharp moves a few times a week, be it a market crash or market spike.

For retail traders, the best trading strategy is to stay out, and wait for dust to settle before coming back into the market. The idea is to stick to your area of competency, if your trading strategy is not suitable for fast markets or news trading.

For those who want to try out fast trading in the stock market or forex market, there are 2 basic trading strategies:
1. Breakout trading + momentum trading
2. Fade extreme moves, like overbought or oversold conditions

The most important part of any strategy is to have a gameplan before you enter the market, or else you will part of be someone’s gameplan.

Your game plan should include your trading strategy, and specific points you will have your entry, stoploss, target, etc.

This way, once the market is open, you can just focus on execution instead of trying to strategize and execute at the same time.

This is especially important if the market is moving fast, or during a market crash, because there is no time to think, and very emotional, hence it would be impossible to make good trading decisions on the fly.

You will end up trying to chase every price movement, and you will always be one step behind those who have a solid game plan and a consistent trading strategy.

Enjoy the video, and remember to “like” and “subscribe”!

Last week, we saw the stock market decline for every day of the week, crashing about 15% from all-time highs, making it the sharpest decline in history.

This huge spike in volatility was excellent for short-term traders, and might also be an opportunity for bargain hunters looking to buy stocks cheaper.

I also made a short video talking about the different approaches to tackle the market crash:

The Start of the Decline

The first 2-3 days of decline was sparked after fears of a worldwide contagion of the Covid-19 virus, which saw a gap down on the S&P 500.

I started to post warnings about not trying to pick the bottom or to start buying, because I knew that a larger move was likely to come.

 

How Far Can this Crash Continue?

As the crash continued, I consulted my charts to plot a possible long-term roadmap, which would see a continued decline to about 15-20%, followed by a rebound and period of consolidation.

 

If there is a strong second wave of selling, we could see a larger sell-off to the bottom of the trendline, or the 200-moving average of the weekly chart.

 

At the same time, we also started initiating short positions on Crude Oil and AUD/JPY.

How to Catch a Falling Knife (Successfully)

On Friday, I predicted that there would be a rebound towards the closing, since there was no meaningful pullback after 6 consecutive days of selling, and also traders would likely close their short positions going into the weekend.

So I started accumulating long positions as the market tested new lows, and true enough, there wasn’t much further decline and even had a bullish surge into the closing minutes.

I took the chance to liquidate some of my positions to lock in my profits for the weekend.

 

Overview of Trading Results for Friday

Overall, it was a once-in-a-lifetime exciting chance to trade such volatility, and also a great learning experience for my students as we got to observe and discuss it together in real-time.

My trading portfolio booked a net 39.52% gain, with most of the profits coming from just 3 positions:

  • Short on AUD/JPY
  • Short on Crude Oil
  • Catching the bottom of S&P 500

 

Going forward, next week is going to be an excellent week for bargain hunting, and I have already posted my target portfolio allocation for my students so that we can be on the lookout for buying opportunnities.

If you would like to avoid missing out on any of such awesome trades (which we deliver on a daily basis), then you should definitely check out our training program & trading signals bundle:
https://synapsetrading.com/the-synapse-program/

See you on the inside!

With many momentum-based trading algorithms in the market nowadays, corrections tend to be sharp and vicious, leaving many traders and investors shell-shocked and unprofitable.

As a market participant, what is your strategy when approaching such a market? What is the best way for you to take advantage of this opportunity?

Enjoy the video, and remember to “like” and “subscribe”!