What Rainbows Can Teach Us About Trading

What Rainbows Can Teach Us About Trading
What Rainbows Can Teach Us About Trading
Matthew Trudeau


Every Spring,  it rains in Nashville. A lot. This Spring is no different, with torrential rains flooding our neighborhood. It’s annoying when it happens, and sometimes, even dangerous. But ultimately, it brings us necessary rain, and almost always gives us something very special: a rainbow.

A rainbow is a sign of new beginnings, and of change. It got me thinking that being on the receiving end of a Southern rainstorm is not unlike being on the receiving end of the market these days. It’s treacherous, stressful, and even dangerous. But in the end, if we can make it to the end of the storm, there will be a bright side. Here are a few ways to make sure you survive the storm, and set yourself up to be ready for the upswing.

  1.  This market really brings home why risk management is crucial. Small losses are manageable; this is a great time to trade small.
  2. Even though this market is volatile, we can be assured that markets trend from high volatility to low volatility; the market will settle down eventually.
  3. Range-bound markets give traders the opportunity to buy weakness and sell strength—this is one of those times.
  4. Trends will emerge, we just have to be ready to get on board and ride the trend when it surfaces.
  5. Markets that give fewer entry signals give traders a time to take a break and study. Study now, and you will be ready when the market starts providing more opportunity.
  6. This market environment is a time for new traders to learn what it feels like to trade inside a range without a trend; this is a teachable moment.
  7. This is a great example of why trading less is more. Less setups means less commissions and less losses.

Follow your trading plan and keep taking your entries and exits for your trading system. The clouds will eventually part and the rain will stop. Be ready.