Many traders overlook the importance of having contingency plans for unforeseen events. Here’s a comprehensive guide to ensure you're prepared for anything the market, or life, throws your way.
1. Power Outages
Plan: Invest in an uninterruptible power supply (UPS) to keep your trading equipment running during short outages. For longer blackouts, consider a generator. Additionally, have a fully charged laptop or tablet as a backup.
2. Internet Failures
Plan: Maintain subscriptions with at least two different internet service providers, preferably using different technologies (e.g., fiber and satellite). Mobile data via a smartphone or a dedicated hotspot device can serve as an immediate, although potentially slower, backup.
3. Brokerage Downtime
Plan: Open accounts with multiple brokerage firms. This not only provides a backup in case one goes down but may also offer you the best features or commission rates for different types of trades.
4. Margin Requirement Changes
Plan: Always have access to emergency funding or maintain a buffer in your account to meet sudden margin calls. Regularly review your positions against potential requirement changes, especially during volatile market conditions.
5. Personal Emergencies
Plan: Set up a durable power of attorney with someone you trust, enabling them to manage your trades or accounts in your absence. Also, consider using stop loss orders to protect your positions without needing to monitor them constantly.
6. Data Provider Issues
Plan: Like with internet services, subscribe to multiple data providers to ensure continuous access to market data. Use software that can integrate multiple feeds to switch seamlessly in case of a failure.
7. Weather-Related Relocation
Plan: Have a mobile trading setup ready, including a laptop, chargers, and any necessary peripherals. Know the locations of co-working spaces or other facilities with reliable internet and power that you can use as temporary bases.
8. Vacations
Plan: Utilize advanced orders like stop losses and take profits to manage your trades in your absence. Consider scaling back your trading activities or shifting to longer-term strategies that require less day-to-day management.
9. Illness
Plan: Prepare for this possibility by automating as much of your trading strategy as possible through the use of algorithms.
10. Extended Bear Markets
Plan: Diversify your investment portfolio to mitigate risks. Have a strategy for bear markets, such as focusing on dividend-paying stocks, bonds, or even considering short selling. Reassess your risk tolerance and investment horizon frequently.
11. Trading Halts
Plan: Always have a diversified portfolio to mitigate the impact of a single stock's performance. Use this time to research and reassess your position in the halted stock based on the announcement's potential impacts.
12. Life's Unexpected Events
Plan: Maintain a healthy emergency fund not just for personal financial emergencies but also to cover potential margin calls or to take advantage of sudden market opportunities. Regularly practice stress testing your portfolio and strategies against various scenarios.
Conclusion
The key to successful trading, especially in times of crisis, lies in preparation and adaptability. By having detailed plans for each of these potential emergencies, you can ensure that you remain in control, regardless of what the market or life decides to throw at you. Stay prepared, stay adaptable, and most importantly, stay calm; your trading career will be all the better for it.
Don’t forget to check one of the most profitable strategies in trading: News breakouts. Episodic pivots, Gap trading deep dive:
Deep dive on Gap trading
For the last couple of months, I’d been working in understanding Gaps and how they behave statistically. Part of the study is in Spanish, but I’ll make sure you describe it. Here you have four ways to see gaps: