Mid December I came down with a virus – I call it “The creeping Crud” because it acts slowly, but over a long time and makes you feel bad – not really sick – just cruddy. Since the first of the year I have slowly begun to feel better but have not been trading. I have a rule about trading when I am not feeling 100% well – that rule is “Do Not Trade When You Feel Less than 100%.”

Well the markets have been very volatile lately – and I miss getting in on the action. But when markets are volatile, as they are now, you really have to be careful. Trading volatility can make you a lot of money – but it increases risk – in two ways. Volatility can reverse very quickly and either stop you out or cost you a lot if you have not stop in place. And more volatility means your stops have to be wider to avoid getting whipsawed out of a market.

All in all, it has been a good time to be observing and not trading. I think all traders need to do that from time to time. Observe and think about trading but don’t actually make the trades – sort of mental paper trading.

About the only thing that I really learned this time around is this market is like a spooked horse – just waiting for the next loud noise to make it take off in some direction or another.

Trade carefully for the near term – as traders we never know for sure what is going to happen next – and these days that is especially true due to the extreme nervousness of the market.

Those multi-cent moves in currency pairs that are so common these days are a double edged sword – and the cuts can be painful as well as profitable.

 

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