Don Kaufman here

Take a deep breath because we’re in the thick of it. The market sentiment is teetering on the edge like a tightrope walker in a hurricane. 

Investors are sweating bullets over Washington’s persistent uncertainty, which feels like it’s bleeding right into the real economy. 

Growth concerns? Check. 

Shutdown deadlines? Check. 

A slew of critical trade reports just waiting to stir the pot? Double check. 

And if all of that isn’t enough to keep you up at night, we’ve got Steve Cohen—one of the sharpest minds in the game—calling for a market correction.

Cohen himself said it on Friday: “Tariffs cannot be positive, okay? I mean, it’s a tax.” 

And he’s not wrong. 

Throw in slowing immigration, federal spending cuts, and the looming specter of a regime shift in the economy, and you’ve got the perfect recipe for market volatility.

So, how are you supposed to trade in this mess without losing your shirt—or your sanity? 

Two words: risk management. And while we’re at it, let’s throw in market psychology because, trust me, this market will mess with your head if you let it.

Let’s break it down. 

This isn’t a time for panic—it’s a time for discipline. Whether you're a seasoned trader or just getting your feet wet, managing your risk and keeping your emotions in check are the only ways to survive and thrive in this environment.

Why Risk Management is the Key to Survival

Here’s the deal: markets don’t care about your feelings or your account size. 

They’ll move up, down, sideways, and sometimes all three in the same day. If you’re not managing your risk, you’re going to get steamrolled.

Cut Your Position Size Before the Market Cuts You

Let’s start with some straight talk: if the market’s expected move for the day is huge—like the SPX’s $53 expected move I talked about earlier—you need to adjust. This isn’t the time to be a hero. Cut your position sizes. 

I don’t care if you’re trading SPY, futures, or even butterflies—when the expected move is this expansive, you have to reduce your exposure.

Why? 

Because the bigger the moves, the bigger the potential for things to go sideways. You don’t want to be over-leveraged when the market decides to swing five handles in a minute (and trust me, it will). 

Smaller positions mean smaller losses if you’re wrong. And let’s be real here: you will be wrong sometimes.

Sit on Your Hands (Literally, If You Have To)

One of the best pieces of advice I can give you is this: don’t trade the first five minutes of the day. Heck, maybe don’t even trade the first 30. 

Why? Because those early moves are a trap. There’s no rhyme or reason to them—it’s just noise, volatility, and people getting chopped up.

Think about it: what good can come from jumping in when the market is swinging wildly, and everyone else is panicking? 

None. Zero. Zilch. 

You’re just going to get in your own way. So, sit back, let the market settle, and wait for clarity.

Know Your Limits Before the Market Tests Them

Before you place a single trade, you need to decide how much you’re willing to lose. 

I’m not saying you should want to lose, but you better have a number in mind—a percentage of your account, a dollar amount, whatever works for you. 

Stick to it.

Here’s the thing: most traders blow up their accounts not because they’re bad at picking trades, but because they don’t know when to stop. They double down, they chase losses, and they let emotions take over. Don’t be that trader. 

Set your limits, respect them, and live to trade another day.

Market Psychology: Your Worst Enemy is You

Let’s talk about the mental game. Markets are unpredictable, but you? You’re even worse. 

Your brain is wired to sabotage you, especially during volatile times. It’s not your fault—it’s human nature. But if you can learn to recognize these psychological traps, you’ll have a much better shot at staying calm and making smart decisions.

The Temptation to Act Impulsively

Volatility messes with your head. 

You see the market dropping like a rock, and suddenly your brain is screaming, “Sell everything!” Or, you see a massive rally, and you’re thinking, “I’m missing out! I have to buy now!”

Here’s the truth: acting on impulse is a guaranteed way to lose money. The market doesn’t care about your FOMO (fear of missing out) or your panic. 

In fact, it feeds on it. If you’re trading based on emotions instead of strategy, you’re playing right into the hands of the professionals who know how to profit off your mistakes.

Volatility Brings Out the Worst in Traders

When the market gets wild, it’s like a pressure cooker for your emotions. You’re second-guessing your trades, overanalyzing every tick, and convincing yourself that you need to do something. 

But let me tell you something: more trades don’t equal better results.

In fact, during times of high volatility, the best move is often no move at all. 

You don’t have to trade every swing or catch every reversal. Sometimes, the smartest thing you can do is step back, take a deep breath, and let the market do its thing.

The Importance of a Trading Plan

This is where having a plan comes in. When you have a solid trading plan, you don’t have to rely on your emotions to make decisions. You already know what you’re going to do in different scenarios.

For example:

A plan takes the guesswork out of trading and keeps you from making rash decisions. And trust me, when the market is swinging wildly, you’ll be glad you have one.

Volatility and Your Ego

Let’s talk about ego for a second. You’re not going to outsmart the market. 

You’re not going to time every bottom or top perfectly. And you’re definitely not going to win every trade.

The sooner you accept this, the better off you’ll be. Trading isn’t about being right—it’s about being disciplined.

 It’s about managing your risk, sticking to your plan, and avoiding the psychological traps that take most traders out of the game.

Stay Sane, Stay in the Game

Risk management and market psychology aren’t just skills—they’re survival tools. The market is a battlefield, and if you’re not prepared, you’re going to get chewed up and spit out. But if you manage your risk, control your emotions, and stick to your plan, you’ll not only survive—you’ll thrive.

So, the next time you’re tempted to go all-in on a hunch or chase a move that’s already gone, remember this: trading is a marathon, not a sprint. Your goal isn’t to win every battle—it’s to stay in the game long enough to win the war.

Now, go out there, trade smart, and remember: sit on your hands if you have to. 

Sometimes the best trade is no trade at all.

If you feel comfortable and want to learn the best strategy I know how to trade this market click here to get started.

It’s perfect for this choppy and volatile market, and the reason why I’m leaning on it so much right now, click here to discover more. 

To your success,

Don Kaufman

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