4 ways to protect yourself from a Grexit

With the looming threat of a Greek exit from the Eurozone, what are traders supposed to do?

Sit on our hands?

Here are 4 practical steps you can take to protect yourself from the volatile spikes and dips, and the potential of a violent swing in the value of the euro …

1. Go with the flow

Increased volatility doesn’t mean you have to increase your tolerance to risk. Know your limits, and stick by them. Consider widening your trade parameters (but not your risk levels). Keep an eye on the average daily range and how this is changing – it could be wise to increase your stop limits and targets accordingly, but remember this must go hand-in-hand with reduced stakes.

If you widen your stop loss, you must reduce your stakes accordingly.

2. Protect, protect, protect

The most important thing a trader has isn’t their knowledge of the market … or their winning strategy … it’s their trading fund.

And you need to protect it ferociously. It may (and should) be money you can afford to lose, but treat it like it’s your grandmother’s savings.

The simplest way to close ranks in turbulent trading times is to reduce staking levels. (Remember, if you’re widening stops, you’ll need to do this anyway, just to keep the same risk.) But cutting your risk in half would be a very valid approach when there’s considerable uncertainty in the markets.

Another way to protect your trades is with hedging, rather than relying on stop losses. In volatile times, stop losses really show their weaknesses. This is where a carefully matched hedge will give you far more security.

If we consider that a Grexit will likely cause a big swing in the value of the euro, then by hedging against this, you can keep a balanced position in the market. For more information on hedging, please check out this post: https://www.tradersbulletin.co.uk/how-to-hedge

3. Catch up on housekeeping …

If you’ve taken a step back from the markets, then it’s the perfect opportunity to do some housekeeping.

Here’s a checklist to get you started.

4. Discover the Asian session

Less volatility … more predictable periods of activity … and perfect for night owls … The Asian session is the Cinderella of the forex timezone and well worth a look if trading later in the day suits you. Find out more here.

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