As the United States prepares itself for a new President, and world waits with baited breath to see what changes the new administration will make, we bring you some top trading tips for how to navigate this potentially turbulent time.
The United States appears more politically polarized than ever before, and the President-elect has already made some controversial statements, such as his promise to build a wall along the Mexican border and his support for Vladimir Putin despite recent U.S. sanctions against Russia, so who knows what may unfold in the coming weeks and months.
We went through some big changes in 2016, with the U.K.’s “Brexit” referendum in June and the U.S. election in November, and we can learn from what we witnessed. Even though volatility is expected at times like this, we never know which direction it will go in. Immediately after the U.S. election, for example, the Dow Jones dropped, but then it quickly did an about turn and started going up, rising to above 19,000 for the first time in its 120-year history on 22nd November 2016. In the past week it has edged ever closer to the 20,000 mark. What we saw initially, when it first dropped after the election, is known as a “fake movement”.
We occasionally see these fake movements whenever there is an announcement in the news, such as the number of unemployment claims, a change in the GDP, or a new PMI (Purchasing Managers’ Index), but when the upcoming news is something as big as a national referendum, a presidential election or a change in government/administration, we could see an even more pronounced movement. However, as we know, nothing is certain.
So here are your top tips, divided into what you should do “before, during and after” the change in U.S. administration.
TIP ONE: Before the Change… Don’t Have Any Open Positions
You need to protect yourself. You don’t know which way the market is going to go, and it may move sharply, so make sure you are not in any open positions. Sit it out.
TIP TWO: During the Change… Don’t Be Tempted To Jump In
While the change is occurring, you may see a sharp movement. Don’t be temped to jump in assuming it will keep going the same way. It might, but this could also be a fake movement. Don’t make any assumptions at this point. We never trade on assumptions.
TIP THREE: After the Change… Let the Market Settle. Then Trade What You See
Yes, it sounds boring, but the most important tip is… don’t do anything until the market settles. And then trade what you see. You have your indicators; you have your plan. Stick to your plan. Don’t do anything differently.
Remember, you are not a speculator, you are a technical analysis trader; so trade using your technical analysis. It’s all too easy to get swept up in gossip and social media fever. Don’t let any of this change your trading plan; don’t do anything differently. Let the politicians make the changes… you just stick to your plan!