Psychological challenges…to be completely honest trading is more mental than technical. Traders that can master the psychological component to Trading generally will fare better than traders that do not.
High volatility brings a variety of psychological and emotional challenges for traders. The biggest and most dangerous is that volatility leads to over-trading. The reason is that when markets are moving fast, you might get entry signals more often; additionally, the temptation to jump in and make a quick buck when things are moving fast is higher as well. A quick fix to over Trading is to extend the time frames that you're Trading as well as reducing your overall risk exposure. When markets are volatile you still have to participate. But Mark and participation is not about making money, it's about how much money you can lose if you don't manage risk properly. With that said the primary focus is always risk management.
The second challenge is dealing with your greed and fear responses. Fearful traders will not be able to fully capitalize on high volatility and cut their winners short, significantly reducing the return of their trading. Greedy traders, on the other hand, try to get even more money by widening their take profit orders too much and risk giving it all back when markets suddenly turn.
Changing our trading approach in different markets allows us to move forward in our trading life. We're new experiences and exciting things. When you don't actively work on evolving your approach to changing markets, trading can become stagnant. Being open to change, learning new trading skills or working on your inner trader can bring about changes you never knew were possible!
