Rajandran R Founder of Marketcalls and Co-Founder Algomojo. Full-Time Derivative Trader. Expert in Designing Trading Systems (Amibroker, Ninjatrader, Metatrader, Python, Pinescript). Trading the markets since 2006. Mentoring Traders on Trading System Designing, Market Profile, Orderflow and Trade Automation.

What to do When the Panic is Over?

1 min read

Generally Panic events trigger strong emotional reactions that often results in ending up catching the trade at unfair price zones and makes too much cognitive bias which will not allow a trader to revise their trade decision. Lets analyze what happened on Nifty Futures.

On 10th Nov 2016 SGX Nifty was trading around sub 8200 levels at the pre-open and market opened with the strong tone of bearishness as the global markets are in panic, S&P futures overnight markets crashed, Asian market crashed and when our markets opened, a panic low of 8076 in Nifty Futures is established in the 2nd minute itself post market open with huge surge in Nifty Futures Volume.

Nifty Futures 1min charts

nifty-nov-futures

Did you ever wondered how a strong panic news got digested in the first few minute itself? Why haven’t the bad news is not a bad news anymore? Once you started believing that the bad news is going to bring more panic , more emotional decisions comes into ones mindset. The more we listen to market experts, tv channels , analyst more we subject to cognitive bias and that often lead not to revise your trade decision when panic event occurs.

A cognitive bias refers to a systematic pattern of deviation from norm or rationality in judgment, whereby inferences about other people and situations may be drawn in an illogical fashion. Individuals create their own “subjective social reality” from their perception of the input.Wikipedia

If you are a discretionary trading style practitioner its better not to react post to any panic events. Your Probability of winning on reacting to post such events are more likely to be a very low and vulnerable as well. Instead one should start listening to the market and wait for their trade setups to arrive. Trading the Charts and Trading the Emotions are two different thing and the latter involves faster wealth destruction.

Generally shorter term traders love fast moving markets and a fast moving markets with emotions and cognitive bias makes on to stay wrong when something different happens from a trading opinion or trade decision. Its wise to realize such traders earlier and cut down the trades faster.

Missing one good trade is still fine rather getting caught in a wrong trade and staying wrong! Once the panic is over its a better to revise trade setup otherwise you will be trading something which is often not part of your trade plan.

Rajandran R Founder of Marketcalls and Co-Founder Algomojo. Full-Time Derivative Trader. Expert in Designing Trading Systems (Amibroker, Ninjatrader, Metatrader, Python, Pinescript). Trading the markets since 2006. Mentoring Traders on Trading System Designing, Market Profile, Orderflow and Trade Automation.

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