The Price You Pay for Trading Volatility

A while ago, I discovered a strange pattern in my trading.

It shows up when the market gets volatile. Volume explodes. I may make a good trade or two, because trading feels easier when volatility is high.

But the ongoing volatility keeps me engaged. If you enjoy trading, then watching a truly volatile session live is better than watching an action movie.

And then, at some point, my mind locks on the question: where will price go next?

It’s not just a passing thought. It’s like the market takes over my entire head. I can’t think about my system anymore. I’m no longer running rules, I’m just running scenarios: up, down, breakout, fakeout.

The strange thing is, in those moments I know I’m not following my process. But I can’t seem to stop it. The volatility blinds me. It eats all my attention.

The Trap of Sudden Swings

This is dangerous. Because the point of having a system is to protect yourself from exactly this kind of situation. But when the market is active and exciting, it overstimulates your brain.

These are the moments when you need to be strong enough to hold back. Otherwise your system dissolves into random trades. And random trades, on average, always lose money.

A high volatility day is to a trader like seeing your favorite prey roaming in herds before your eyes. When your brain sees the prey is everywhere, the urge to hunt becomes irresistible. It tells you that you are about to win the game of evolution. Your entire body wants to act.

This is why it’s critical in moments like this to make sure your primitive survival brain isn’t controlling your thinking. I’ve shared some methods on how to handle situations like this in earlier posts, for instance this post on how to calm your body in sixty seconds.

How to Break the Spell

I’ve tried a few things, and here is what I’ve found to help on those high volatility days:

1. Name the state

   The first step is noticing it. If I notice I start thinking way outside of my system, I say to myself, “I’m caught”. This gives me just enough distance to reintroduce rational thinking.

2. Physical reset

   Sometimes I just stand up. Walk away, stretch, breathe, or make a coffee. Volatility feels urgent, but most of the time, nothing is lost in a short pause (but a lot can be lost if trading hastily).

3. Pre-plan volatility

   This one is the strongest. If I know my system already has rules for wild moves, I feel less need to “figure it out.” I can just let the system run. The next sections has more on this one.

How to Trade in Highly Volatile Sessions ?

How to prepare for volatility? Volatility is usually introduced by scheduled economic events (GDP data, employment data, FOMC decisions) or random announcements and incidents (such as tariff changes or geopolitical shocks).

With scheduled events, it’s easier. You know volatility may be coming. If simply staying aware of it is not enough, I’d recommend having stricter rules for those sessions. For instance, trade with a much smaller size, take only high quality setups, and set tighter profit taking targets.

If it’s still hard, skip trading on key economic event days until you are performing well on regular days. Many professional traders intentionally skip these days, so there’s no shame in sticking with calmer sessions. Remember, the goal is to make money, not to be a hero.

With random volatility drivers, it’s much harder. From a sound trading system point of view, the best choice is to close any open trades and shut down your platform immediately. Then watch the drama until the market settles again.

These events happen only a few times a year, so staying away has little impact on your long term PnL. But it can have a major impact if you decide to trade them. Unless your system is built for extreme volatility, trading on these days is not much different from a weekend in Las Vegas.

How to Keep Your Account on Volatile Days

Volatility doesn’t just move prices. It moves your mind.

One universal method in psychology is “zooming out.” Every time you feel you’re neck deep in and can’t seem to keep hold of your system anymore, take a step back. Just stand up and walk away from your desk.

It may take a minute or two, but you’ll start seeing things clearly again, with your trading system back in the driver’s seat. Only then is it safe to step in again.

The work is not to control the market. The work is to notice when the market is trying to control you. If the action on your screen takes over your thoughts, go away and don’t come back until you’ve managed to reset your mind.

Want to send this post to someone who is records a loss on every FOMC announcement trading session?