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5 Valuable Tips to Survive Trading During the Coronavirus Panic


Trading in the age of the coronavirus may feel overwhelming, but these five tips can help investors during high volatility sessions.

Living in the world of the coronavirus panic is unprecedented, to say the least. As new phrases like “social distancing” and “flatten the curve” enter our lexicon, the attempts to slow the spread of COVID-19 have disrupted daily life — and, in turn, the economy.

With so many businesses unable to move forward, the markets are beginning to reflect the new reality. On March 15, the Federal Reserve announced it planned to slash the benchmark interest rate to somewhere between zero and 0.25 percent and buy $700 billion in Treasury and mortgage bonds. The Fed said it would implement “quantitative easing,” meaning the central bank would buy hundreds of billions of dollars in bonds to push down rates.

The Fed’s intervention did little to quell anxiety in the stock market, though. One day later, trading temporarily halted for the third time in a week. The S&P 500 was down by 8.1 percent at the opening bell, invoking a circuit breaker halt for 15 minutes. The Dow Jones Industrial Average, the NASDAQ Composite, and the S&P 500 all fell by 12–13% by the end of the day.

Although the Fed’s announcement may have intended to inspire confidence and ease lending, the fear in the markets hasn’t disappeared. People are still struggling with spending and traveling when many businesses are inoperational for the foreseeable future.

But just because the global reaction to the pandemic is unprecedented doesn’t mean the idea of a highly volatile market is. The stock market crash on March 16, 2020 was the second largest daily percent loss in the Dow Jones Industrial Average in history, ranking after Black Monday in 1987 and just before the Wall Street Crash of 1929. While we can never truly predict what will happen during a volatile market, we can learn from the lessons of past market changes. Using the strategies that have worked best during those turbulent times may help with the economic uncertainty of COVID-19.

Keep these five easy tips in mind:

  • 1) SET UP YOUR DEFENSES

Taking risks is a critical part of successful trading, but taking calculated risks has a higher chance of success. Before entering the market during the current coronavirus panic, mastering a simulated trading program can develop your trading expertise and boost your confidence. Services like SPC’s Try2BFunded can help you obtain funding for your trading and test your strategies. After you have established your plan, you can also build your protection by using stop-loss orders and tighter trailing stops.

  • 2) HAVE PATIENCE

As intimidating as the coronavirus spread may seem, remember that the instability will pass. According to data compiled by Freddy Lim, co-founder and chief investment officer of the Singapore-based StashAway, the market has always bounced back from public health emergencies. These epidemics, including HIV/AIDS in 1981, SARS in 2003, and swine flu in 2009, all recovered within a few months. While the current shutdown of businesses and government facilities differs from most other epidemics in history, those health crises only had temporary effects on the economy.

  • 3) MONITOR AND TAKE ADVANTAGE OF PRE- AND POST-MARKET TRADING

Stay updated on announcements regarding corporate and governmental response to COVID-19 and understand how they can affect market trends. On Score Priority Club, the social network for traders, you can discuss marketing and trading ideas with market professionals to formulate your own opinions. Monitoring the news and following chats with other traders can prepare you for any potential future circuit breakers or dramatic changes.

  • 4) COMMIT TO SMALLER TRADES

When there are wild swings in the market, some traders find it helpful to commit less capital to traders. While the ATR (average true range) of this market is 5-10x normal, you could size down by half and still have the opportunity for large gains. If 1000 share lots is your normal tier, reduce your size to 500. This will reduce your risk and market impact. There are traders looking for larger lot sizes, so try and remain as quiet as possible. And don’t forget about index and sector ETFs (exchange traded funds), which can give you exposure to a wider range of stocks and diversify you against the market risk of an individual company. Expect plenty of pre-announcements and earnings shortfalls in upcoming weeks.

  • 5) KEEP CASH FLOW TRADING LARGELY INTRADAY, FOR NOW

We’ve never been a fan of the term “day trader.” It implies a certain instability and inconsistency, when in fact, the best intraday traders can regularly harvest money from the market despite the conditions. With five to 10 percent swings becoming the norm, try to stay clear of the one-to-three-day timeframes that were the staple of short-term trading in recent years. There is plenty of opportunity between 9:30 a.m. and 4 p.m. EST without betting on market bottoms and stimulus relief. Be a trader, not a gambler.

If history is an indicator, one only needs to wait out the storm to see an encouraging shift. 10 years ago, not long after the 2008 financial crisis, Warren Buffett had an optimistic outlook in his annual letter to Berkshire Hathaway shareholders.

“It’s been an ideal period for investors: a climate of fear is their best friend,” wrote Buffett.

The public response to the coronavirus may be unprecedented, but it may also bring unprecedented opportunity.


Best regards,

Tony Huck

Chief Executive Officer, Score Priority

Toll-Free + 1-855-274-4934

Domestic + 1-646-558-3232

Info@scorepriority.com

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