Market Volatility: Manage Your FOMO

Hi, welcome to this quick session on how to trade market volatility. The reason why we wanted to deliver this session now is because of the huge market swings that we're seeing over the last few days. We've had limit down to limit up in the S&P. We've had wild ranges within gold, both higher and lower, and obviously gaps lower in oil as Russia and Saudi Arabia failed to an agreement. A lot of new traders are asking us, How do I take opportunity in this type of environment? But most importantly, how do I protect myself from getting hurt? So we wanted to give this quick session on what we call FOMO, fear of missing out. And the reason why I want to focus on FOMO is because for new traders, we believe this is one of the key reasons why they enter into bad trades, make poor decisions, and end up getting hurt as a result. So what is FOMO, fear of missing out? After years of market calm, volatility has spiked back to life, Extraordinary markets create extraordinary opportunity, and FOMO is when a trader can see a move, they can see a move developing, they want to jump on that move, and actually that reaction is too late, it's mismanaged, it's not well thought out, and they get hurt. And that leads to a poor decision-making tree, something which I'm going to talk to you about briefly. And I'm going to talk to you about how can you stack habits to then limit the damage of of that FOMO. So where does it start? Well, it starts with lack of self-awareness, and this is a good depiction here of a new trader. The blue arrow is where they buy and the red arrow is where they sell, and here you can see quite calm execution at the beginning of the day, but then we have a large piece of economic data and the trader goes short. This is the euro versus the dollar, gets stopped out, and then sees the market go go their way. And I don't know whether you've had that experience before, but it's incredibly frustrating, and they've seen it, and that leads to a whole path of mismanaged execution, random execution, until they can't really trade anymore. And you can imagine that happening on some of the markets that we've seen recently, you know, on some of these— we're turning on a sixpence here. Let's say if you had a really bullish view on gold, you could have been spooked out of all your positions here, only to see it move higher again, now only to see it move lower, And really the kind of moves we've not seen for years, which can create a lot of frustration. And every time you can see one of these moves, it's very common for a new trader to think they're missing out and they're going to jump on it and maybe they're going to start getting long, for example, around here because they think we're going to break 1,700 and they get stopped out and then it's a disaster. You know, you can really start getting topped and tailed if you don't manage your FOMO. So why can it lead to further losses? Well, it's not actually just on the loss of the trade that you've missed out, but imagine this as a kind of decision-making tree, and ideally, you know, you want to be making good trading decisions all of the time, but after you've had a shock, after there's maybe a negative event, everything— you know, you've probably seen it— you're watching every price, you're watching every single movement much more closely, and that negative experience can then lead to a future path of negative decisions because you've allowed that negative experience to then pollute your further actions. I want you to not do that. I want you to manage yourself better so you can set up a system of habits that saves yourself from the worst of yourself when it comes to trading volatile markets. How can you manage your FOMO? First of all, recognize the emotional flag. So you know yourself well. When you have that emotional impulse, when you when you see a move that you want to jump on, or when you hear that others are on a trade that you've missed, or when you've been stopped out of a trade that actually turns out that it could have gone in the right direction, you, you must be able to recognize that emotional impulse. And as soon as you do, rather than expecting yourself to have the willpower to then do the right thing and be patient and choose the next trade, what I want you to do is try and embed a rewarding habit. So as soon as you've had that impulse, do something that's easy and simple and rewarding and feels good that is not trading. It might be go and get a glass of water, make yourself a cup of tea, stretch your back, whatever it might be, but it's not trading. And it's by following that one habit, by habit stacking, it gives you time to breathe, to save yourself from yourself, and then reflect on the fact that more opportunities will come. You don't have to jump straight back in, and just give you that higher level of thought. It's harder to do this when it hurts, of course, but when it hurts, that's definitely when you don't want to rely on your willpower, because with every nerve and sinew, you'll be wanting to jump into the markets and think that this volatility's gonna work. Try and understand dopamine. You know, this, after all, trading in volatile markets is exciting and it's fun, but you don't want trading to be exciting, you want it to be accurate and disciplined and thoughtful, When you first trade in a volatile market, you know, the cue and the craving and the response, the reward comes as soon as you're involved in that volatility. The next time it happens, actually, you're getting that reward here, right at the cue and the craving stage. You're getting that dopamine hit really early on, and you need to try and recognize that. It's this feeling I want you to recognize, so you could say, "Okay, I'm excited, I really want to take involved— get involved in this opportunity." but rather than jumping in there and then, I want you to have— be able to think it through, and that really comes from habit stacking. So make it easy. An emotional trader might lead themselves directly to an undesirable outcome. This might be overtrading, this might be taking too much risk, this might be moving stops in a volatile market. Ideally, you want to have the discipline to have a desirable outcome when there's much market opportunity out there. In order for you to do that, I want you to take this advice: when you feel that emotional flag that has led to poor decision-making in the past, try and stack easy and rewarding habits. That's not necessarily trading, but it could be as quick as taking a deep breath to then lead to a desirable outcome. This forms part of a much wider journey of continuous improvement and control. When you experience this habit stacking, review your trading, review how it's impacted your trading, and if you conclude that it's doing the right thing and it's having a positive impact— and then we've put this arrow as a red arrow because this is the hardest one to do, you know— do the right thing, implement it, continue to go through a continuing learning, a continued cycle of growth. This is what makes traders that have traded for longer, those of you like me who have seen 2 crises now, traded through this volatility, better equipped to deal with this type of environment because we've been through these learning circles already. Why now? As I've just suggested, over 50% of all those in the fund management industry now have traded for less than 10 years, which means they haven't yet really been tested. They haven't been tested to their core of how they manage themselves within an environment of uncertainty and risk, and I want you guys to have the advantage of self-awareness, and habit stacking that comes from that type of experience. If you've enjoyed this quick session, please do have a look at all the further videos down on this page from Piers Curran talking about fundamentals, Anthony Cheung about how to trade the news. It's absolutely relevant to this market environment. We've got a huge program here with all the very best of Amplify Trading's content now available to you online. If you like the subject titles, if you want to join us and also have regular catch-ups with us here on the trading floor, it's all part of this subscription. Please do enroll now, and I look forward to seeing you in there. Thank you very much. Good luck with your trading.