Market news & insights

Introduction – Are Risk Management Rules Changing?Whether you’re trading FX, index CFDs, commodities, or stocks, today's market environment is arguably at its most risky, but also, of course, with increased risk, some would suggest comes increased opportunity.Whichever way you look at it, the most challenging time in attempting to have a positive trading outcome is when markets become increasingly headline-driven and with that increasingly volatile.Such markets demand decision-making which must be more rapid and flexible, as in minutes things can change with a planned news release that strays away from expectations, policy decisions made and then unmade within days or even hours adding to uncertainty, or a single unexpected social media post from those in power, can and often are sending markets surging or collapsing in a heartbeat.Old-school risk models that aim to protect capital and retain profit have always been an essential part of the trader’s toolbox. However, it could be suggested that these are built around more stable correlations, more gradual price shifts with at least some degree of certainty about what could happen in days or even weeks.With that traditional scenario appearing increasingly obsolete for right now, it merits questioning whether this is a market that traders who still rely on static stop distances, fixed-size positions, or set-and-forget strategies will thrive in. The reality is that they will often find themselves on the wrong side of violent whipsaw moves.Of course, it is worth emphasising that any risk management is far better than ad-hoc or, even worse, an absence of clear and unambiguous actions, irrespective of underlying market conditions. However, being able to achieve positive trading outcomes in all market conditions sometimes needs more than just having some rules in place and the discipline to follow them. It is often not just about being a smarter trader but about being the most adaptable.This article aims to offer some suggestions as to how to review what you are doing now with risks associated with capital protection, profit retention and missing opportunity.What could new market conditions mean for traditional risk management?Having given context for why exploring this in more detail, let’s examine the potential challenges that current market pressures may put upon more traditional risk management approaches that, as a reference, may not have been developed to be as effective as the trader may hope for.There are 3 factors that seem very relevant:

1. Predictable market reactions to data, relatively stable spreads, and modest price swings are all based on some degree of certainty, with relatively speaking, little deviation, if you look at week-by-week changes in expectation beyond an occasional shift. Today, that world appears to be gone. We all know markets become uncomfortable in uncertain environments, You would only need look at the VIX index to see levels of uncertainty, not seen at such high levels recently since the early days of the COVID pandemic, Static stop placements that ignore volatility levels are increasingly ineffective, often triggering a trade closure unnecessarily in erratic price action.

It is clear that what is expected to happen next may all change tomorrow, and then again, the day after.

2. Historical asset relationships, such as safe-haven flows into instruments such as the USD, have broken down when market discomfort becomes panic. Although some assets, such as the obvious example of gold, have flourished, arguably even this has had significant intraday movements. A breakdown of such relationships can not only impact on direct trading of such instruments but also the potential for effective exposure balancing.
3. Sudden liquidity shocks that can occur around planned (and unplanned) news events are commonplace, it seems for right now, as is often the case in headline-driven markets. Price moves, either way, are often exaggerated as sentiment shifts rapidly and dramatically. Few traders want to be on top of the market and spend a whole day in front of a screen, but even being away for a few hours before checking in again can result in significant profits given back to the market without the ability to trail stops in a timely way. It is crucial that profit risks, i.e. giving back significant potential profit, are viewed with equal vigour as capital risk, i.e. a losing trade.

7 New Rules You Need to Know#1 Dynamic Position Sizing and Exposure Based on Volatility:Rather than applying a uniform lot size or number of contracts across all conditions, an adjustment in exposure, not only for individual trades but also across your account, would seem prudent.In high-volatility environments, typical of headline-driven markets, stop placement and position sizing should adjust:

1. To account for wider ranges in price. Tools like ATR (Average True Range) or real-time implied volatility readings can be used to scale positions appropriately or move stops so that market noise is less likely to result in premature exit.
2. To account for not only market conditions now but also the uncertainty created by potential new headlines. As previously referenced, the frequency of unplanned market-shifting news, outside of economic data release, is massively increased. Expecting the unexpected is always a massive challenge in practical terms, but approaches such as reduction of position sizing as well as reducing the number of positions open, e.g. if you have a maximum number of six positions as your norm, then considering reducing this to three positions may be worth contemplating as an approach.

#2 Scenario-Based Risk Planning:Perhaps current risk planning merits that traders think in possibilities, not certainties. For each trade, maybe traders should be asking the question, “What happens if this trading idea doesn’t work? “What happens if there is a significant change in tariff policy once the US wakes up?” Can I trust previous significant key price levels to hold?Planning responses for different outcomes can mean the difference between a controlled exit and a catastrophic loss.#3 Exposure Risk Awareness Over Single Trade Focus:It’s easy to focus risk management on a single trade. However, if you’re long AUDUSD and EURJPY, short the VIX, long copper futures CFD, and long mining stocks due to technical entries, your real exposure is heavily tied to a continuation of a “risk on” sentiment. If there is a sudden change in this sentiment, you potentially have portfolio exposure that could result in losses across five positions simultaneously.See your risk as this and perhaps not only, as suggested before, both setting a maximum number of trades but also being aware of “risk on” of ‘risk-off’ exposure.#4 Watch Stop Placement where others will be looking for them (and take advantage of this too!):Stop-losses placed at obvious technical levels (previous highs, lows, round numbers) are increasingly vulnerable in fast-moving markets. Experienced and institutional, as well as “stop hunters”, can and will exploit this, particularly in markets as they are now. Be extra vigilant to not only stay away from such levels, but also perhaps give a little more space away from them to account for increased volatility, potentially wider spreads and slippage.#5 Accessibility, Notifications, and Rapid Response:It is prudent that traders make sure they use the system tools that are available. These may include alerts on price levels, automated system trailing stops, as well as what you would normally use with stops and take profits.With pending orders, it may well be worth considering just giving a little more space to where you place orders to account for greater volatility, and perhaps it is worth giving up a few pips to be more certain of a price breakout, for example (as well as having time limits on these).Be aware that times such as these merit perhaps a few more frequent visits to your computer screen than may be your normal access. If this is not possible, then again, perhaps look at what and how you are trading, and not only be aware of the risks but temper your positions accordingly.#6 Flexibility in Strategy Selection:In hyper-volatile periods, not all strategies remain valid.Traditionally, in such times, breakout systems are thought to have a better chance of thriving (although false breakouts may be common – see above for pending order placement), while mean-reversion systems may often produce fewer desirable outcomes.However, there are often choppy periods of range-bound consolidation where, in reality, breakout strategies can suffer.Today's trader must constantly assess, sometimes multiple times during the trading day, whether the current market conditions align with their strategy style and if not, either adapt, step back from markets, or switch approach.Getting that overall big picture through looking at longer timeframes is arguably always important, but even more so in the current market state.#7 Psychological Capital Protection:It would be amiss to discuss these sorts of markets without referencing the potential psychological toll.Every trader has a breaking point where emotional control falters. Protecting financial capital has obviously been a major theme of this article, but protecting psychological capital, i.e. the ability to make rational decisions after a loss, is just as critical AND of course, the point at which you recognise that such a level has been reached.Establishing maximum daily or weekly loss limits, having mandatory time-outs after big losses (and arguably big wins too), and owning that you are straying from emotional discipline are all practical steps that can be taken.The risk is that market risk spirals, a failure to adjust and set such levels can be very damaging as the market sucks you in and poor decision take aver, don’t put yourself at risk destroy months of progress in a few days of undisciplined, emotionally driven trading.Conclusion: The REAL Trader’s Edge in a Volatile WorldIn a market state where we can see dramatic price shifts within seconds, rigid risk management approaches need to be reviewed.Flexibility, awareness, and using the system tools to have access to assist in monitoring and taking actions are not a luxury but arguably a necessity.Protecting your capital and reducing profit risk today isn't simply about setting a stop and a take profit, then hoping for the best; it’s about building dynamic, responsive systems that take into account increased uncertainty and volatility in headline-driven price moves.Making adjustments in your behaviour, your trading systems and of course keeping an eye on your own decisions are all paramount to not only survive but to give yourself to thrive in markets such as these.Many of the approaches referenced throughout this article are not particularly complex, most are very simple in fact.As always, you have choices to make.

It has been over 21 days since ‘Liberation Day’ – since then, the forest of chaos ensued as lead investors, traders, and the full gamut of financial participants lost sight of where we stand.Not surprising when you look at the reporting versus the market. The chaos has led to mass loss of confidence from both the consumer and business side, spending intentions have plummeted and ‘American Exceptionalism’ is ‘ending’ depending on your point of view – this is what’s being reported.The market, however, has had other ideas – since Liberation Day, most have gone a full 360-degree round trip and moreAUD/USD

NZD/USD

Equities, too, have done some staggering reversals of fortune. Outside of China and the US markets, most major indices are either at or near breakeven. We are talking about the likes of Canada, the UK, Australia, most of Europe, Japan, South Korea, Australia, New Zealand and take Mexico, one of the hardest hit nations in the new tariff order – it's up 6.4% since Liberation Day.So, can we see the forest from the trees? Or should that be the trees from the forest?We need to drill down to one player, and for that, we want to concentrate on Australia, as the chaos from Washington has clearly consumed everything and led to a loss of reality.So, where does Australia sit? Well, it entered 2025 with solid economic momentum. Fourth-quarter GDP figures surprised to the upside, inflation appeared to be bending back toward the RBA’s target band, and consumer sentiment was on the mend until Liberation Day. Domestically, the data painted a picture of a soft landing: one where inflation was moderating without significantly damaging the labour market or derailing growth. Happy days if you are running the RBA.And despite Liberation Day’s disruptions, Australia’s fundamentals overall remain largely intact.Capacity utilisation has begun to ease, labour markets are still tight, though the participation rate has slipped, and headline inflation pressures have eased thanks to falling import costs and policy-driven subsidies (which is not a good thing but has helped). Core inflation, too, is easing thanks to lower inputs from the likes of rents, household and personal services and financial services, but as yet has not cracked the RBA’s target band.Overall, the economy continues to expand, although modestly and forecasts for 2025 and 2026 have been downgraded as the outlook is becoming more finely balanced.One thing to keep in mind, too, is that Australia may even benefit from some aspects of the shifting global trade environment, particularly if supply chains are redirected away from the U.S., leading to cheaper goods and a further softening of import-driven inflation that Australia is heavily exposed to.A Deliberate Easing Cycle We background all this to give colour to an interesting trade development that has been lost in the chaos. RBA rate pricing.First things first – the consensus for the RBA cash rate is that by Christmas this year, the cash rate will fall to 3.1% - previous consensus was 3.6% - that’s a full 100 basis points (bps) out of the cash rate from this point in time.What significantly differs is the timing and size of cuts to reach the 3.1%.The RBA has already taken the first step with a February cut, which it framed “not as the beginning of a cycle but rather as a reversal of its precautionary hike in November 2023”.So, February was just a ‘righting’ of the ship. Where now? With inflation continuing to moderate and global uncertainty mounting, the case for additional easing is building—albeit cautiously.Inflation data supports this slower, data-dependent approach and having now seen and heard Michele Bullock in action for over 18 months, this is likely to be the most probable course of action.Real-time estimates for the first quarter trimmed-mean CPI due on the 30^th of April sit at 0.6%, quarter-on-quarter and 2.8% for the year-on-year figure, which would mark the first time core inflation has been in the RBA’s target band since 2021.Housing inflation has continued to decelerate—likely a sustained trend through 2025—and extended electricity bill subsidies are expected to further soften headline numbers. At the current trajectory, consensus has inflation ending 2026 around 2.6%, firmly within the RBA’s target range. All positive news for an RBA cutting cycle.However, this is where the divergence is building – the inflation story is leading to a large front-loading of rate cuts. We know the RBA is prepared to act, but it remains wary of providing strong forward guidance. The minutes from the April meeting reaffirmed the Board’s concern over sticky unit labour costs—an issue exacerbated by weak productivity. Subsequent public remarks from the Governor and Deputy Governor stressed a cautious, reactive stance, as well as keeping some powder dry if the uncertainty leads to even larger issues. But a 50bps cut at the 20 May meeting looks to be an upside move.This will be interesting for the likes of the AUD, although it has rallied hard against the USD, like all other major currencies have. Against the likes of the EUR and GBP, it has clearly been priced on global risk, yes, but also the prospect of a large cut on 20 May.We caution this view. Why? The upcoming May 3 election has added another layer of complexity. Both major political parties have pledged significant increases in public spending across sectors such as healthcare, housing, aged care, and defence. The most recent pre-election Budget included modest tax cuts and extensions to electricity subsidies. The opposition has flagged further tax relief, including a potential cut to fuel excise as well as major support for home ownership through subsidies.These promises imply wider deficits and a rising debt load regardless of who forms the government. With no meaningful supply-side reforms on the table, Australia's fiscal trajectory is skewing looser.That ‘assistance’ is likely to stay the hand of the RBA from a shock cut for a more restrained 25bps cut. This is in keeping with the ‘narrow path’ it still uses for justification, balancing the need to support domestic sentiment and inflation targeting with caution around external volatility and fiscal expansion.Thus, we believe a more measured path is likely – this being 4 25bps cut meetings. Most likely being May, August, September and November. This is likely to see the AUD jumping from time to time due to overly bearish rate-cutting viewpoints.The forest is there – we just need to look in the right places and ignore the blowing breeze through the trees.

Why Is Gold in Focus Right Now?Throughout early 2025, gold has surged to record highs, breaching $3,400 an ounce for the first time in history. For newer traders, this may seem like a “blue-sky” breakout without precedent. For experienced market participants, it raises a more practical and important question, i.e. what is driving this rally, and is it sustainable?Understanding the fundamental and technical context behind such moves helps us not only trade the present but plan for what may come next, which can guide us in the decisions we make with our trading action.This article aims to build upon recent outlook webinars that we have delivered recently, which have waved the bullish flag throughout. However, I must admit to having been surprised at the velocity of the rally.We will try to unpick key drivers as well as analyse what could be next and why.What’s Driving the Gold Rally in 2025?Let’s take a look at the main contributing factors that are currently supporting the upward momentum in gold prices:1. Rising Global Uncertainty and Geopolitical RiskPolitical instability, as it has historically, remains a strong macro backdrop for gold. Recent flare-ups in geopolitical conflict — particularly in Eastern Europe and the Middle East — have returned “safe haven” flows back into focus. This is typical during periods when traditional risk assets like equities face greater downside volatility.Additionally, the somewhat turbulent start (even more so than many predicted) to the new U.S. administration has introduced an element of policy uncertainty, particularly around trade, inflation and the impact of economic growth. The possibility of further tariffs or fiscal tightening reinforces gold’s appeal as a form of protection.Key Point: Traders need to monitor not just existing conflicts, but also the market perception of risk. Gold often responds not to what is happening, but to what investors fear might happen.2. US V China – trade war brewing?Tariff dramas have been the major market chatter and sentiment changer over the last few weeks. On top of general broad international tariffs, and to pause or not to pause decisions, the major attention is, and likely to continue to be, the escalation of tariffs between the U.S. and China has pushed inflation expectations higher. While inflation has generally cooled since its 2022–2023 peaks, cost-push factors such as tariffs can reintroduce price pressures, particularly on imports.Central banks globally are including tariffs within a rate decision narrative, but no central bank is more in focus, of course, than the Federal Reserve. In Trump's last presidency, the current Fed chairman Jerome Powell came under fire for rate policy, and already, it was noteworthy that the current president aimed a shot at him once again. The market is aware that inflationary shocks are not off the table once tariff impact starts to bite at importer costs in the US, and the “priced in” rate cut that is likely to occur in June is still some time away, and the certainty that this may happen may start to waver. Gold has historically performed well when real yields (interest rates adjusted for inflation) fall or remain negative.Key Point: Watch CPI data closely. If inflation expectations start to climb again due to trade-related costs, gold may continue to benefit.3. U.S. Dollar WeaknessThe U.S. dollar index (DXY) has declined to multi-year lows, making gold more attractive to non-U.S. investors. This is a classic inverse relationship — as the dollar falls, gold often rises.A weaker dollar could potentially indicating that the market could be pricing in a more dovish Federal Reserve, with rate cuts potentially on the table later in the year, However, more likely in this case, the dramatic drop in the USD, which this week hit 3 year lows, is more likely due to concerns about growth and even the perceived chance of recession.At the time of writing, the earnings season is ramping up, and despite Q1 results so far being relatively positive, we are already seeing concerns expressed (as is often the case with uncertainty) relating to forward guidance. This, of course, plays into the slowdown narrative. This week's PMI data feels as though it may have even more importance than usual.Key Point: Gold traders should always include USD direction in their macro framework. It often amplifies or suppresses broader trends in the metal.4. Central Bank and Institutional DemandAnother major support for gold is the persistent demand from central banks, particularly in emerging markets such as China and Turkey. These institutions are increasingly shifting reserves into gold as part of long-term diversification away from USD assets.Evidence suggests ETF flows have also picked up, showing increasing but not outrageous levels, suggesting the move is still institutional in nature rather than purely speculative.Key Point: As long as institutional and central bank demand remains steady or rising, gold has a structural reason to be supported underneath current price levels.What the Technical Picture Is Telling UsWhile fundamental drivers continue to support gold, the technical setup also tells an important story — one that can help traders decide whether to stay in, take partial profits, or prepare for tactical re-entries after any price pullback. Let’s explore the technical picture in a bit more detail.

• Gold’s Long-Term Trend Structure Remains Intact

Gold has been making a consistent series of higher highs and higher lows since mid-2023. This trend has been confirmed across multiple timeframes, including the daily and weekly charts — an important feature for position traders.Currently, price is well above both the 50-day and 200-day exponential moving averages (EMA), which have now turned upward and widened — a classic sign of trend strength and directional bias. When prices pull back in strong trends, these EMAs often serve as dynamic support levels.

• Momentum: The weekly RSI is elevated (above 75), which suggests gold may be in overbought territory in the short term.

What About RSI Being Overbought?One of the most common misunderstandings among newer traders is how to interpret an elevated RSI (Relative Strength Index), particularly when it crosses above the traditional 70 level.RSI above 70 does not automatically mean 'sell' — especially in strong trends, so this merits a little further discussion.Here’s why a high RSI may not be a problem:

1. Context matters: In trending markets, RSI can remain elevated (above 70 or even 80) for extended periods without any meaningful pullback. This is often referred to as a 'momentum breakout' condition.
2. Confirmation from volume: If rising RSI is accompanied by increased volume, it suggests that momentum is being supported by participation, not exhaustion. Currently, weekly volume has expanded on breakout weeks, supporting the move.
3. New highs with RSI > 70 are actually bullish: A strong market making new highs and registering overbought readings usually reflects strength, not vulnerability — unless divergence begins to appear.

Key Point: Use RSI as a momentum gauge, not a reversal trigger in isolation. In this case, RSI supports the idea that gold is strong, not yet stretched to the point of reversal.

• Next Targets: Many technical analysts are watching $3,500 and $3,650 as key psychological and Fibonacci extension levels. A sustained break above $3,400 would likely bring these into view.
• Support Levels: If price retraces, $3,200 and $3,050 are likely areas where buyers may step back in, especially if the macro story remains intact.Key Point: Momentum remains strong, but even in trending markets, corrections are normal. Having a plan for where to re-engage is just as important as knowing when to stay out.
• What Would a Healthy Pullback Look Like?

Even the strongest trends pause. If gold does retrace in the short term, the nature of the pullback is more important than whether it happens.Signs of a healthy pullback include:- Controlled decline in decreasing volume- Price respecting prior breakout zones — e.g., $3,250–$3,280- Holding dynamic support like the 20-day or 50-day EMA- Reversal candle patterns near support (e.g., hammer, bullish engulfing)Key Point: In strong markets, pullbacks are often shallow and short-lived. They can be opportunities to scale in, provided the structure remains intact.Sentiment and Positioning: Are Traders Too Bullish?It’s important not to get swept up in price action alone. The COT (Commitments of Traders) report can provide valuable insight into whether markets are approaching overly crowded levels.

• Large Speculators have increased their net long positions, but not yet at levels seen in major historical peaks.
• Retail traders have only recently started to increase exposure, which suggests the move is not fully mature.
• ETF inflows, while rising, are still below the aggressive flows seen in 2020.Key Point: Current positioning suggests there may still be room to run, especially if new catalysts emerge. However, if positioning becomes too lopsided, be ready for faster and sharper corrections.

What Could Change the Narrative….Risks to Watch?Even with a strong bull case, traders must stay aware of what could derail gold’s momentum:Risk Event #1: Sudden USD reboundImpact on Gold: Could trigger a sharp pullbackRisk Event #2: Hawkish Fed surpriseImpact on Gold: Logically higher real yields = bearish gold due to USD impact – however, gold’s role as an inflation risk is likely to offset this.Risk Event #3: De-escalation of trade/geopolitical tensionsImpact on Gold: Safe-haven demand may soften if this is part of the reason for the current price rise. However, with other factors predominating price moves for right now, again, this may not be critical.Risk Event #4: Profit-taking and reversal in momentumImpact on Gold: Could create a short-term topKey Point: Risk doesn’t always mean reversal — but it does mean adjusting trade size, stops, and expectations when conditions change.Summary: Stay Informed, Stay DisciplinedGold’s rise in 2025 has been impressive, but it hasn’t been irrational. The macro backdrop, institutional support, and technical structure all support the trend.However, markets rarely move in straight lines, and traders should stay ready for both continuation and correction scenarios.Success is likely to lie in applying consistency in the management of profit and capital risks, as well as having a clear method to re-enter as appropriate. consistently while remaining adaptable to changing conditions.Traders should view the current gold move as a reflection of persistent macro themes and technical support rather than any sort of “bubble”. Whether you’re already long or waiting for a retracement, your decision-making should be rooted in having a clear and unambiguous trading plan and, of course, the discipline of follow-through in the actions you take.

Why have a Trading Plan? We all know that markets can be chaotic, unpredictable, and emotionally wearing when you are trading. Without a structured approach, even experienced traders can find themselves making impulsive and often poor decisions, both on entry and exit, that lead to significant losses and cap any potential profit.A trading plan serves as your personal roadmap for trading financial markets—a set of rules and guidelines that dictate your trading behaviour in varied market conditions irrespective of which instruments or timeframes you are trading. Think of your trading plan as the foundation of your trading business. It can provide clarity, consistency in action, and the basis for improvement in outcomes (through measurement and refining). These are all crucial for long-term success in trading.This article aims to address some of the key principles of trading plan development and usage. For those less experienced, use it as guidance to get you started. For those of you who are a little further down your trading journey, here is a refresher and checklist to make sure you have what you need in place.Common Mistakes Traders Make (And How to Avoid Them)Mistake #1: Trading Without a PlanProblem: Many traders enter the market with nothing but hope and excitement, treating trading more like gambling than a strategic business venture.Solution: Commit to never placing a trade that is not consistent with your written plan on entry AND exit. Even a simple plan is better than none at all. Start with basic rules about entry criteria, position sizing, and risk management and then add to it from there.Mistake #2: Creating an Overly Complex PlanProblem: Some traders create plans so intricate that they become impractical to follow in real-time trading conditions in the heat of the market.Solution: Your plan should be comprehensive enough to cover all scenarios but simple enough that you can make decisions and take action on key points under pressure. You should only use indicators on your plan that you understand, i.e. what they are telling you about the chart you are looking at. Mistake #3: Failing to Define Risk GuidelinesProblem: Without clear risk guidelines, traders often take positions that are too large relative to their account size. Failing to recognise this may lead to catastrophic losses or giving back significant profit from trades that go in your direction.Solution: Establish strict risk-per-trade rules, e.g. x% of account size (many professionals never risk more than 1-2% of their capital on a single trade). Define maximum drawdown levels that would trigger a trading pause or strategy review.Mistake #4: Not Adapting to Changing Market ConditionsProblem: Market conditions constantly change, and a strategy that worked last year might not work today.Solution: As part of your performance evaluation, it would seem logical to include a reference to a market type, e.g., bullish, bearish, choppy, or volatile. Through recording this, it may be possible to recognise which markets are the best fit for a specific strategy (and, of course, those that are not).Mistake #5: Ignoring the Psychological Aspects of TradingProblem: Trading psychology often determines success more than technical knowledge, yet many plans focus exclusively on entry and exit rules.Solution: Incorporate psychological safeguards into your plan. Identify your emotional triggers and articulate in your plan some rules for when you should and shouldn't trade, e.g. when unwell or having a succession of losses. It is always good practice to take a break from trading intermittently.Step-by-Step Guide to Creating Your Trading PlanStep 1: Select Your Markets and TimeframesNot all markets or timeframes will suit your personal circumstances or risk profile, so defining:

• Which markets match your interests, knowledge, and available trading hours?
• Will you be a day trader, swing trader, or longer-term position trader?
• What specific timeframes will you focus on for analysis and execution?

Many successful traders may ultimately specialise in specific sectors or instruments where they've developed an understanding of what creates price movement and what may happen next, rather than trying to trade everything. This will obviously take time but is worth some consideration if you find you are excelling in certain conditions. Step 2: Develop Your Trading Strategy This is the core of your plan, describing exactly how you'll identify and execute trades:Market Analysis Methods:What you use to help make trading decisions is at the basis of any strategy. There are a number of tools you can use, such as technical indicators (e.g. moving averages, RSI, MACD, etc.) and chart patterns you'll look for (head and shoulders, double tops, flag patterns). Fundamental factors you'll consider (earnings reports, economic data releases, sector trends) are all classic examples.Entry Rules:These are specific conditions that must be met before entering a trade. These MUST be unambiguous and objective, often a set of criteria statements that cover EVERY element of your trading decision making.

• This will often consist of statements about price action, candle structure and patterns used. Additionally, a series of confirmation signals that are usually required will be outlined (e.g., volume confirmation above a longer-term moving average) as well as a news event filter (whether you'll trade around major announcements) and perhaps the time of day.

Each of these requires a separate statement. Exit Rules:

• Profit target methods (fixed points, e.g. X ATR multiple, technical levels, e.g. next resistance if in a long trade, and the use of trailing stops)
• Stop-loss placement strategy (volatility-based, e.g. X ATR below entry, support/resistance based)
• Partial profit-taking rules (scaling out at specific targets)

Be exceedingly specific in your strategy. For example:

• Enter long when price closes above the neckline following a reverse head and shoulders
• Price is over the 50-day EMA
• RSI is between 40-60 (indicating potential momentum shift)
• Volume is increasing from the previous bar
• Place stop-loss at the most recent swing low
• Trail a stop using the 20EMA
• Your strategy should also address different market conditions. A strategy that works in a trending market may fail in a ranging market. Consider creating decision trees for various scenarios you might encounter.

Step 3: Establish Risk and Money Management RulesThis section protects your trading capital and is arguably the most critical part of your plan:

• Maximum risk per trade (ideally 0.5-2% of total capital)
• Position sizing formula based on stop distance (e.g., Risk Amount of account capital ÷ Stop Distance = Position Size). At an advanced level, you could look to tie this to an objective strength of signal measure and adjust accordingly.
• Maximum correlated exposure (e.g., no more than 2 trades of FX pairs when one of these includes USD)
• Maximum account drawdown before taking a break (e.g., 10% drawdown triggers a trading pause)

These rules should be non-negotiable and followed rigorously, regardless of how confident you feel about a trade.Step 4: Create Your Trading Routine There is no doubt that consistency breeds success in trading:

• Pre-market routine (what analysis you'll do before trading)
• During market hours (how you'll monitor positions, what would trigger new entries)
• Post-market review (how you'll record and analyse your trading day)
• Weekly and monthly review processes

A structured routine eliminates many decision points that could otherwise lead to impulsive actions.Step 5: Plan for Continuous ImprovementYour growth as a trader SHOULD never stop (although many traders fail to progress). make sure that you have a system in place for making sure you DO :

• How and when you'll review your trading performance
• Metrics you'll track to evaluate success, e.g. Net profit, drawdown, win rate, average win/loss
• Education resources you'll use to improve
• Benchmarks for advancing to larger position sizes or new strategies

Step 6: Document EverythingCompile all the above elements into a written document and, of course, have a trading journal to assist in the evaluation of performance.Within this, don’t forget to include some reference to how you are feeling, what you need to work on and what learning could be next for you.Step 7: Putting Your Plan into Action Having a plan is only the first step—consistently following it is what separates successful traders from the rest. Here are some tips for adherence:

1. Keep it visible: Post a summary of your trading rules where you can see them while trading.
2. Use checklists: Create pre-trade checklists to ensure you're following your plan for each trade.
3. Automate where possible: Use technology to enforce discipline (preset stop-losses, position sizing calculators).
4. Accountability partners: Consider sharing your plan with a trusted trading friend who can help keep you accountable.
5. Reward compliance: Develop a system to reward yourself for following your plan, regardless of the trading outcome.

Remember, the success of a trade is not measured by profit or loss but by how well you adhered to your plan. A losing trade that followed your rules is actually a success from a process perspective, and adhering to your plan despite singular losses is more likely to result in better outcomes over a succession of trades.Conclusion A well-crafted trading plan transforms trading from a stress-inducing gamble into a structured business operation. While markets will always contain an element of unpredictability, your response to them doesn't have to be unpredictable.Take the time to develop a comprehensive plan that reflects your goals, resources, and personality. Then commit to following it with discipline. In the words of legendary trader Paul Tudor Jones, "Don't focus on making money; focus on protecting what you have." A good trading plan does exactly that—it protects you from yourself and the market's inevitable uncertainties.Your trading plan is a living document that will evolve as you grow as a trader. The process of creating and refining it is itself a valuable exercise that will deepen your understanding of the markets and your relationship with them.

We have deliberately waited a few days before commenting on “Liberation Day” and the fallout that would come from President Trump’s new tariffs regime.It will go down as just another historical period of heightened volatility, uncertainty, risk, and a whole manner of market turmoil. This is why we wanted to put what is happening right now into some context. (If that is possible, considering how volatile the period is and how erratic and how quick the president's manner can change.)US markets have seen this kind of violent move only three times since the 1950s. The S&P’s over 10 per cent drop in the final two sessions of the week following President Trump's "Liberation Day" tariff announcement has it in rare company – and not in a good way - October 1987 (Black Monday), November 2008 (Global Financial Crisis), March 2020 (COVID-19).So, why such a reaction?The market reaction reflects not the ‘shock’ but the scale and brevity of the tariffs. A 10% across-the-board tariff was broadly expected. There were some calculations as much as 15 to 20% judging by the net $1 trillion in and out of the federal government revenue. (This is the impact of DOGE and other government spending cuts coupled with the tariffs now in place that will offset the promised 0% personal income tax for those earning up to US$150,000)But what markets didn’t see coming was the country-specific layer. Take China as an example; the additional 34% reciprocal tariff on Chinese goods pushed the total to 54%. With other measures factored in, the effective burden could approach 65%.Then there were the tariffs that were tied to trade deficits, hitting Japan, South Korea and most emerging markets between the eyes (i.e. Vietnam).The EU saw a 20% rate, which was within expectations, while the UK, Australia, New Zealand and others landed at 10%. Canada and Mexico were spared, as was Russia, North Korea and Belarus, interestingly enough.Energy was excluded, which is unsurprising considering Trump’s goal of getting energy down, down and staying down. Pharmaceuticals and semiconductors were also carved out, however, this is more down to the probability of more targeted action like that of steel and aluminium.Now, what is different about this market shock and risk off trading is that it would send funds flowing to the US dollar, ratcheting it higher. But not this time. The dollar weakened against the euro. Theories as to why range from Europe’s lighter tariff load to euro-based investors pulling money out of the US. The same could be said of the Swiss Franc.All this leads to an average effective tariff rate of around 22%. That number will likely climb once product-specific tariffs on areas like pharmaceuticals and lumber are formalised. Some of this may be negotiated down, but not soon, and the possibility of tit-for-tat retaliation like China has now entered into could actually see it going higher still as the President looks to outdo country responses.The broader uncertainty this introduces to the US outlook is now at its highest since early 2020 and has the markets pricing in 110 basis points of Fed rate cuts this year – a near 5 cut call shows just how unprecedented this is.In fact, in no time in living memory has a developed economy lifted trade barriers this aggressively or abruptly. What has been implemented is textbook economics 101 supply-side shock.Input costs go up, finished goods get pricier, and the ripple effects hit margins and employment. Expect to see this in the next six months.Expect core PCE inflation to finish the year at 3.5% —nearly a full percentage point higher than the consensus forecast from just a week ago.Real GDP growth is forecast to slow to 0.1% on a quarter-on-quarter basis. That path may be volatile as Q1 could look worse due to soft consumption and strong imports, with a mechanical bounce in Q2.What has been lost in the chaos of last Thursday and Friday’s trade was the March Non-farm payrolls jobs print came in at 228,000, which was above consensus, the caveat being it is less so after downward revisions to prior months.Hospitality hiring was strong, likely helped by a weather rebound that won’t repeat. Government payrolls are holding steady for now, but cuts are coming. Layoffs in defence and aerospace (DOGE) are already underway, and tariffs will act as a brake on new hiring. Expect softer reports ahead.Unemployment ticked up slightly to 4.15%, reflecting a modest rise in participation. That’s still within range, giving the Fed cover to hold off on immediate action. But if job losses build pressure on the Fed to act, it will increase quickly.The consensus now is for the first rate cut of this cycle to start in May, triggered by softer April payrolls and earlier signs of deterioration in jobless claims and business sentiment.Zooming out from just a US-centric point of view, the macro standpoint is just as bad if not worse. The scale of tariffs adds pressure on industrial production, trade volumes and cross-border investment.That’s feeding into commodity markets, where the outlook has turned more cautious.Brent is expected to fall into the low US$60s as trade frictions and oversupply build. LNG looks weaker too, with soft Asian demand and less urgency in Europe to restock. Iron ore is more exposed to China, and the reciprocal tariffs put a vulnerability into the price due to the broader global slowdown and higher prices to the US.Looking at China specifically, infrastructure remains a key policy lever that would offset the possible loss of demand in aluminium, copper, and steel. Monetary indicators are beginning to turn, suggesting the start of a new easing cycle. It also suggests that policy remains inward-facing, and a focus on domestic stability would mean a metals-heavy growth path. Thus suggesting Australia could be the ‘lucky country’ once more and could escape the full burden of the global upheaval.In short, the global reaction isn’t just about tariffs. It’s about what happens when policy shocks collide with already-fragile global demand, and central banks are forced to navigate inflation that’s driven by politics, not just price cycles.This is the question for traders and investors alike over the coming period.

In the world of trading, irrespective of what instrument or timeframes you are choosing to trade, losses aren't just inevitable—if you choose to embrace the opportunity they present, they also have the potential to be massively educational.According to studies from the Financial Industry Regulatory Authority, nearly 70% of retail traders experience significant losses within their first year of trading across all asset classes. Yet behind almost every successful trader's story, regardless of their market specialty, lies a narrative of devastating setbacks followed by remarkable recoveries.As Warren Buffett famously stated, "The most important quality for an investor is temperament, not intellect."In this article, where the current tariff-induced market shock is still very much on trader minds, we will look at how successful traders transform their losses—both in the contexts of everyday trading setbacks and catastrophic market shocks—into the foundation for their greatest comebacks.Clearly, although I am making some broad generalisations, the causative factors and response to loss will be unique to the individual trader. Your job when reading this is to “look in the mirror” and honestly appraise your losses and grab the elements of loss recovery that are a fit for you as a trader in whatever markets you choose to trade.The Psychology of Loss: Understanding Your Brain on Red NumbersWhen your portfolio turns red, your brain experiences a similar neurological response to physical pain. Neuroscience research has revealed that financial losses activate the same brain regions as physical threats, triggering fight-or-flight responses that can derail rational decision-making.The typical emotional cycle following a significant loss includes:

1. Denial – "This is just a temporary pullback"
2. Anger – "The market is rigged against retail traders"
3. Bargaining – "If I can just get back to breakeven, I'll never make that mistake again"
4. Depression – "Maybe I'm not cut out for trading"
5. Acceptance – "This loss is now data I can use to improve"

While this cycle is natural, successful traders accelerate their journey to acceptance. As trader and author Mark Douglas writes, "The faster you can accept a loss, the quicker you can learn from it."Clearly the basis of this, and much of what is at the foundation of trading recovery, is “owning” your situation, taking responsibility for what has happened but also the chance to use this to create your trading future.The Post-Loss Analysis Framework: Turning Pain into DataRather than rushing to recover losses, elite traders first engage in systematic analysis. Here's a framework for transforming losses into actionable intelligence:

1. Separate Market Factors from Execution Errors

Ask yourself: Was this loss due to unforeseeable market events or flaws in your execution? Categorising losses helps identify which elements were within your control. Of course, these are the things you can positively influence in future planning.For market factors: Document the specific conditions that led to the loss to recognise similar setups in the future.For execution errors: Break down each decision point where different choices could have mitigated the loss.

2. Identify Emotional Triggers

Review your trading journal (if you don't keep one, start today, as anyone who has heard me teach will have heard before) to pinpoint emotional states that preceded poor decisions. Where any of these the case for you.

• Were you trading larger sizes after a series of wins?
• Did outside life stressors affect your focus?
• Were you trading out of boredom or FOMO?
• Were you unwell or have significant events outside of your trading?

I have spoken many times on the need to monitor your “trading state” with the ultimate sanction of course of temporarily removing yourself from trading or at least adapting your trading to account for any increased risk to optimum decision making in the heat of the market action.As Peter Lynch noted, "Know what you own, and know why you own it." This applies equally to understanding why you make certain trading decisions.

3. Quantify Position Sizing Impact

Many devastating losses stem not from incorrect market analysis but inappropriate position sizing. Calculate how different position sizes would have affected the outcome:

• What would the loss have been at 25% of your actual position size?
• How would scaling in rather than entering all at once have changed the outcome?
• Did you violate your own risk management rules?

4. Evaluate Your Original Trading Ideas

Revisit your original trading ideas and strategies with brutal honesty:

• What evidence supported your idea?
• What contradictory signals did you ignore?
• Was your time frame appropriate for the setup?

Remember Buffett's wisdom: "When you find yourself in a hole, stop digging." Recognising when a (trading) thesis is invalidated is as important as forming one.Having said this, this does play into the narrative that the major influence is all about entry. Invariably, and as many experienced traders will recognise, it is as much about exits. Ask yourself similar questions about YOUR exits such as:

• What evidence supported your decision to stay?
• What contradictory signals did you ignore that were suggestive it may have been technically or fundamentally prudent to get out?
• Did I get greedy and see a win disappear and turn into a loss because my exits didn’t account for changing market conditions.

Navigating Market Shocks: When Everyone PanicsWhile individual trading losses are challenging, market-wide shocks present unique recovery challenges across all trading vehicles. Events like the 2008 financial crisis, the March 2020 COVID crash, or the 2022 tech sector collapse create systemic disruptions in stocks, forex, commodities, cryptocurrency, and futures markets alike. These cross-asset dislocations require specific recovery strategies that work regardless of what you trade.Phase 1: Survival ModeWhen markets experience shock events, liquidity often disappears precisely when you need it most. During these periods:

• Reduce position sizes by 50-75% until volatility normalizes
• Increase cash reserves to capitalize on opportunities when stability returns
• Identify which assets are experiencing liquidity crises versus fundamental revaluations

As Ray Dalio explains, "The biggest mistake investors make is to believe that what happened in the recent past is likely to persist."Phase 2: Opportunity AssessmentMarket shocks create dislocations between price and value across all asset classes. Once the initial panic subsides:

• Look for quality assets trading at distressed prices, whether they're currencies, commodities, cryptocurrencies, or traditional securities
• Identify market segments experiencing forced selling rather than fundamental deterioration
• Analyse historical recovery patterns from similar market events across your specific trading vehicles

Although these principles are often applied to stocks, this same may be equally relevant to selecting specific currencies, commodities, or cryptos that show strength during recovery phases.Signs a Market Shock Is SubsidingRecognising when a market shock is ending is crucial for timing your re-entry. Look for these cross-asset indicators:

1. Volatility Normalization: When instruments like the VIX for stocks, MOVE index for bonds, or historical volatility metrics for forex and crypto begin trending downward consistently over multiple sessions.
2. Volume Patterns: Panic selling typically peaks with extraordinary volume. When volume returns to more normal levels while prices stabilize, the acute phase of the shock may be ending.
3. Correlation Breakdown: During shocks, correlations across assets approach 1.0 as "everything moves together." When correlations begin normalizing and assets resume individual price paths, recovery may be underway.
4. Institutional Positioning: When the commitment of traders (COT) reports, fund flow data, or whale wallet movements (in crypto) show smart money beginning to accumulate, the worst may be over.
5. Media Sentiment Shift: When mainstream financial headlines shift from panic to "bargain hunting" or "value spotting," sentiment may be improving.

Phase 3: Strategic Re-entryRe-entering the market after a shock requires methodical execution, regardless of what you trade:

• Start with small positions (25% of your normal size) whether you're trading equity indices, currency pairs, commodity futures, or cryptocurrencies
• Scale in gradually over weeks or months rather than days, adapting the timeframe to the typical volatility cycle of your specific market
• Prioritize liquid instruments with tight spreads—major forex pairs over exotics, large-cap stocks over small caps, bitcoin over microcaps, front-month futures over back months
• Set defined markers for increasing exposure that make sense for your trading vehicle (e.g., "When VIX drops below 25, I'll increase stock position sizes by 15%" or "When 30-day realized volatility in EUR/USD returns to pre-crisis averages, I'll increase forex exposure by 20%")
• And of course, begin to put in place some of the lessons you have learned from your evaluation as to what you could have done differently. To go back to the same again is unlikely to serve you well.

Risk Management 2.0: The Post-Loss EditionRecovering from significant losses demands refined risk management, regardless of which markets you trade. Consider implementing these cross-asset approaches:The 2% Recovery RuleUntil you've recovered psychologically and financially from major losses, limit each trade's risk to 1% of your current account size—not your pre-loss portfolio.This prevents the common mistake of trying to "get it all back at once." This principle works whether you're trading corn futures, Japanese yen, technology stocks, or Bitcoin. Traders often make the mistake of using different risk parameters across different markets, but during recovery, consistency in risk approach is crucial.For leveraged instruments like futures and forex, this means being especially vigilant about effective position sizing. A 2% account risk in a 50:1 leveraged forex position requires much smaller position sizing than the same risk level in an unleveraged stock position.The 3-Strike System – the potential to work your way back into markets whilst managing a potential “aftershock”After a significant loss, implement a three-strike system for any new position, adapting for your market's characteristics:

1. Enter with 30% of the intended position. In markets with defined seasonal tendencies like commodities, this initial entry might align with historical inflection points. In more technical markets like forex, this might coincide with key support/resistance levels.
2. Add 30% only if the position moves in your favour by a predetermined amount calibrated to your market's typical volatility. For a stock index, this might be 1-2%; for cryptocurrencies, perhaps 5-8%; for treasury futures, maybe just 0.5%.
3. Add the final 40% only after a key technical level confirms your entry idea. The nature of this confirmation varies—options traders might look for specific implied volatility behaviour, while futures traders might focus on volume confirmation patterns.
4. AND, of course, manage profit risk as you go with potentially staged exits.

This systematic approach prevents emotional overcommitment while providing multiple decision points to evaluate your analysis, whether you're trading energy futures, currency pairs, or equity options.Drawdown Recovery CalculationTo determine how long recovery might take, use this formula, which applies across all trading vehicles:Recovery Time = (Loss Percentage ÷ Expected Monthly Return) × 1.5The Comeback Plan: Rebuilding With IntentionRecovery isn't merely about regaining lost capital—it's about rebuilding a more robust trading approach. Your comeback plan should include:

1. Psychological Reset

Taking a complete psychological reset is essential after significant losses. Step away from all trading activities for at least one week following major drawdowns. This isn't merely about taking a break—it's about creating the mental space necessary for objective analysis. During this period, deliberately engage in activities entirely unrelated to markets to refresh your cognitive resources and perspective.Many successful traders report that their best insights about market behaviour come when they've mentally detached. Whether you trade forex, futures, options, or any other instrument, the psychological impact of losses affects your decision-making in similar ways. Practice visualization exercises daily during this reset period, imagining calm, methodical responses to future setbacks across various scenarios relevant to your particular trading vehicles.

2. Skills Development

Identify specific skills that could have prevented or mitigated your losses, tailored to your trading approach:If technical analysis has failed you in forex markets, consider strengthening your understanding of interest rate differentials and monetary policy influences. For crypto traders, this might mean better on-chain analysis skills. For options traders, it could mean improving your volatility forecasting methods.If position sizing is the issue, study risk management methodologies specific to your trading vehicle. Futures and forex traders might focus on improved margin utilization techniques, while options traders might explore better ways to size positions relative to implied volatility.If emotional control was lacking, explore mindfulness practices specifically for traders. Regardless of what you trade, the psychological demands remain similar—develop routines that work for your trading style and personality. Many successful traders across all market types report benefits from meditation, journaling, or working with trading coaches who understand the psychological dimensions of their specific markets.

3. Confidence Rebuilding Through Small Wins

The path back to confidence works similarly whether you trade agricultural futures, exotic currency pairs, or growth stocks. Start with trades that have:High probability setups that match historical patterns in your specific market. For commodity traders, this might mean well-defined seasonal patterns; for forex traders, clear support/resistance levels with confirming indicators.Limited downside with predefined maximum loss levels appropriate to the volatility of your trading instrument. A 2% stop might be reasonable for a stock position but entirely too tight for a cryptocurrency trade.Clear exit criteria that are written down before entry and respected regardless of how the trade develops. Different markets require different exit strategies—trailing stops may work well in trending commodity markets but fail in choppy forex conditions.Focus on building a streak of small victories rather than recovering losses immediately. Trading confidence is rebuilt through consistency, not home runs. This principle applies whether you day trade S&P futures or swing trade altcoins. The psychological value of consecutive wins far outweighs their monetary value during the recovery phase.

4. Progressive Scaling

Establish clear metrics for when to increase position sizes, customized to your trading vehicle:After 10 consecutive profitable trades, increase the size by 10%, but only if those trades were representative of your normal strategy across different market conditions. For options traders, this means profitability across both low and high volatility environments; for forex traders, it means success in both trending and ranging markets.After reaching 50% of drawdown recovery, revisit normal position sizing, but with additional safeguards based on lessons learned. This might mean using options to hedge spot positions, implementing correlation-based position sizing in your portfolio, or using volatility-adjusted position sizing in highly variable markets like cryptocurrencies.After demonstrating consistent profitability for three months across diverse market conditions relevant to your trading vehicles, return to standard trading parameters. This time frame allows for testing your refined approach through different market regimes, whether you trade indices, energies, metals, or digital assets.Perspective From the Masters: Wisdom After LossesThe greatest traders all share stories of devastating losses followed by tremendous comebacks. Their perspective can often offer invaluable guidance as well as encouragement:

• "I'm only rich because I know when I'm wrong. I basically have survived by recognizing my mistakes." — George Soros
• "There is nothing like losing all you have in the world for teaching you what not to do." — Warren Buffett
• "The elements of good trading are cutting losses, cutting losses, and cutting losses." — Ed Seykota
• "Being wrong is acceptable, but staying wrong is totally unacceptable." — Paul Tudor Jones

Conclusion: The Paradox of LossPerhaps the most counterintuitive truth about trading is that losses—properly processed—are potentially the foundation of long-term success. They provide the feedback necessary to refine strategies, strengthen discipline, and develop the psychological resilience required for sustained performance.Of course, such potential is only the case should you choose to take appropriate actions.As you face your next loss, whether from an individual position or a market-wide shock, remember that your response to that loss—not the loss itself—will ultimately determine your trading trajectory.The path from setback to comeback isn't merely about recouping capital -- it's about emerging with enhanced skills, refined processes, and the unshakable confidence that comes from navigating difficult markets.Trading losses aren't failures, they are feedback—consider them tuition payments for lessons that, once truly learned, can never be taken from you.