Will Volatile Events ‘Flush’ Markets?
Did the explosion today from across the world set in motion a market flush, possibly revealing a Black Swan event?
Hindsight will reveal the technical and historical significance of the market’s tumble today after almost a week of stronger than expected highs across the major indexes.
Simpler’s traders have been watching technical signals for a sharp move to the downside before today’s events. The Black Swan possibility raises more caution.
In the stock market, a Black Swan event is an unexpected and sudden situation — war, weather, pandemic, technology advancement — that drastically affects the market in a negative way. A Black Swan event can’t be predicted with any traditional forecasting methods. The event can’t be calculated into forecasts because it doesn’t exist until it suddenly occurs.
How can traders be prepared for something that doesn’t exist and can’t be calculated by the usual prediction tools?
Times like these reveal how trading can be more like an artful discipline than a technical science.
This is where being disciplined and controlling emotions, i.e. not letting news affect you, comes into play as traders. The market will follow its own path no matter what, so always be prepared to take what the market gives.
In reality, smaller negative events happen all the time in the market. An unexpected bad earnings report can tank long positions, and a sudden fraud filing against a CEO can wreck a company’s stock. These smaller unexpected turns don’t get as much attention as the effects of a global crisis.
Traders can navigate negative news and events by focusing on a predetermined trading plan that manages risk using tools that are effective in almost any market.
A part of this process is letting the market reveal solid setups within chart patterns. This helps eliminate much of the noise created by news headlines.
A precise and objective setup designed to handle this market environment is also needed.
Even before today, Simpler’s traders were seeing the market as positioned for the beginning phase of a volatility explosion.
A “flush” in the market was and is expected sooner than later.
And there is an expectation at Simpler that this “flush” will be followed by a multi-year bull run that dwarfs anything seen so far.
Traders can learn to trade while accepting uncertainty… and focusing on brighter possibilities. Accept what is now and what lies ahead as part of the trading experience. And keep trading forward.
We Saw: Tragedy hit world, nation, market.
We’re Watching: If market tumble continues, worsens.