Things to keep in mind while trading in a high volatile market?

<p id="isPasted">In volatile markets, be sure you are mentally and tactically prepared to manage the increased risks. In other words, Volatility is something you're comfortable with. There is a possibility of significant capital loss.&nbsp;</p><p>Trends are not necessarily erased by market volatility. Stocks may continue to move in a particular direction, albeit at a higher risk. The key for a buyer is to find a stock that has been trending higher steadily but hasn't rocketed higher. Get in before a price acceleration, not after.</p><p>When a stock breaks out of an identifiable range of support and resistance, traders try to "buy the breakout". As buying pressure overcomes selling pressure, downward trends tend to weaken. When selling pressure overcomes buying pressure, upward trends often fizzle.&nbsp;</p><p>The breakout trader does nothing if the stock remains within that range. However, if the price breaks through the resistance level, the trader will look to buy immediately in hopes that the breakout signals the beginning of a new sustained move upward.</p><p>When markets are volatile, profits can disappear and turn into losses, so lock in more gains whenever you can. It might be a good idea to lower the profit target for some of your positions here. Alternatively, if your stock is moving sharply higher, consider selling a portion of your position, while letting the rest ride to capture any further gains.&nbsp;</p><p>If you're more concerned about protecting your profits than getting stopped out, use a trailing stop-a type of stop order where the stop price trails the stock's bid price as it rises-but set it much tighter than normal.</p>

<p>1. Buy options when volatility is less because the premium will be less and when volatility increases suddenly we end up making bigger profits.</p><p>2. At expiry, OTM options will be 0 - zero</p><p>3. Long options will give you profit after the stock price moves from the spot price towards the strike price and beyond (strike price+ premium paid)</p><p>4. Buy a call option when you are bullish about a stock or index, and sell a call option when you think a certain level cannot be broken on the resistance.</p><p>5. Buy a Put option when you are bearish about a stock or index, and sell a put option when you think support cannot be broken</p><p>6. Statistics say that 65% of the option writers make money and the remaining option buyers lose.</p>

<p id="isPasted"><strong>1. Define your objectives and bolster your defenses</strong></p><p>Before embarking on a course to trade volatile markets, it's important to be mentally and tactically prepared to manage the risks involved. So the first step is to make sure that:</p><ul><li><p>You are comfortable trading when volatility is high.</p></li><li><p>You recognize that there is the potential for significant loss of capital and are prepared for this risk.</p></li></ul><p>Assuming you are "ready for action," the next prudent thing to do is to revisit the risk control measures you have as part of your trading plan.</p><p>Two important considerations are position size and stop-loss placement. During volatile markets—when day-to-day price swings are typically greater than normal—some traders place smaller trades (commit less capital per trade) and use a wider stop-loss than they would when markets are quiet. The goal is to avoid getting stopped out due to wider-than-normal intraday price fluctuations while attempting to keep your overall risk exposure about the same. As always, traders should note that stop orders can be executed far away from the stop price if there is a big price gap or rapidly changing market conditions.</p><p><strong>2. Focus on stocks trending with the market</strong></p><p>One key opportunity in trading volatile markets is that trending stocks may see the rate of their trend increase. This means that looking for stocks that are already trending in the direction of the overall market may allow a trader to generate profits more quickly than during normal, quieter markets, albeit with a potentially higher degree of risk, as mentioned earlier.</p><p>The key to this approach is to find a stock that has been trending higher (if the stock market is in an uptrend) but which has not yet accelerated the pace of its advance. A short seller trading in a volatile market should look for a stock that has been declining but which has not already experienced a collapse or "waterfall" decline. The goal is to get in before an acceleration in price, not after.</p><p><strong>3. Watch for breakouts from consolidations</strong></p><p>One common trading method used by many traders is "buying the breakout." With this approach, a trader monitors a stock that is trading within an identifiable support and resistance range. As long as the stock remains within that range, no action is taken. However, if the price breaks out to the upside, the trader will look to buy the stock immediately in hopes that the breakout signals the beginning of a new upgrade for the stock.</p><p>In quieter markets, a stock may break out to the upside and lose its momentum, drifting sideways or eventually falling back below the breakout level. However, in a volatile market, where prices are moving rapidly, an upside breakout can be followed by an immediate and substantial run to higher prices. This type of potential is the primary reason for trade breakouts in a volatile market environment.</p><p>The catch is that in a volatile market, a reversal from a false breakout can come very quickly and the subsequent price decline may be more severe than in a quieter market. As a result, a trader who chooses to buy the breakout in a volatile market should seriously consider a stop-loss order to potentially limit their loss after the price falls a certain distance back below the breakout point (or some other acceptable percentage amount).</p><p><strong>4. Consider shorter-term strategies</strong></p><p>Another approach that traders use when markets are volatile is to adopt a shorter-term trading strategy. This typically involves attempting to take profits—or at least lock in profits—more quickly than normal. Consider the example of a trader who typically buys stocks as they break out above resistance. Typically, after entering a trade, this trader places a stop-loss X% below the entry price and then waits for a profit of at least Y% to accrue before activating a trailing stop—that is, a conditional order that uses a trailing amount, rather than a specifically stated stop price, to determine when to submit a market order. The trailing amount, designated in either points or percentages, then follows (or "trails") a stock's price as it moves up (for sell orders) or down (for buy orders). As the stock rises in price, the trailing stop will also rise, thus allowing you to potentially sell at a higher price.</p><p>But in more volatile markets, when profits can vanish and turn into losses in the blink of an eye, you might consider making the following adjustments to exit the trade more quickly:</p><ul><li><p>Set a specific percentage profit target.</p></li><li><p>Sell part of a position at the first good profit-taking opportunity and hold the remaining position in hopes of generating additional profits.</p></li><li><p>Use an overbought/oversold type indicator (RSI for example) and sell when it signals that the security is overbought.</p></li><li><p>Activate a trailing stop sooner than normal and/or use a tighter trailing stop than normal.&nbsp;</p></li></ul><p><strong>Be prepared</strong></p><p>Traders crave price movement as it offers them an opportunity to make bigger profits. But at times, price movement can accelerate beyond what they are used to. A driver traveling 100 miles per hour has the potential to reach his destination more quickly than one traveling at 60 miles per hour. However, the first driver must be prepared to deal with all the hazards that come with traveling at such a high rate of speed.</p><p>The same is true for traders. When market volatility reaches a certain level, things can start to move so quickly that closer attention and a change in tactics may be necessary. The key is to prepare in advance. The steps discussed in this article are no guarantee to keep you on course but are worthwhile to consider if you think you're ready to take on volatile markets.</p>