Zak Westphal: The Investor's Guide to High-Risk Trading

Zak Westphal: The Investor's Guide to High-Risk Trading

Daniel Hall 23/05/2024
Zak Westphal: The Investor's Guide to High-Risk Trading

It seems like just about everyone fancies themselves a trader these days. And who could blame them?

Brokerages and platforms make it extremely easy to tap into markets that were once only accessible to the elite traders of Wall Street. With just a few clicks from your smartphone, you can buy stocks, crypto, name it. Some even incentivize you to jump in the deep end with promises of glory and even offer commission-free deals. With temptation like that, it’s no wonder newbies are diving headfirst into volatile markets seeking their fortune.

While increased access is definitely something to be celebrated, let's be real - one wrong move here can spell disaster for your capital. Make enough mistakes trading options or futures and your account can go to zero real quick. The volatility that seems so alluring cuts both ways.

That's where Zak Westphal comes in. After spending years mastering volatile markets, Zak went on to create StocksToTrade to help share the prudence behind that success. Having mastered risk management, portfolio balancing, and relentless education over a decades-long career, Zak knows a thing or two about prospering in the turbulence.

In this post, he shares tips to steer volatility's double-edged sword toward fortune over failure. For those willing to learn, enormous potential lives within proper risk-taking. But first, an understanding of the fire you play with - and how not to get burned.

Overcoming Emotion in Volatile Markets

“One of the best ways you can protect yourself when trading volatile markets is to stop letting your emotions get in the way anytime prices go haywire,” explains Zak. " To do this, it's almost a non-negotiable to set up clear loss limits before you enter any trade. And you need to vow to stick to them no matter how attempting it is to override them when positions swing wildly.” 

Zak has watched countless traders abandon their plans, mainly due to two primary emotions: fear, and greed. Once either of these two get a hold of you, it's very easy to throw your judgment out of the window, along with your hard-earned cash. 

Ideally, Zak recommends spending a few weeks, or even months, paper trading and rehearsing scenarios from market history so that you can build up some genuine resilience. That's the only reliable way to prevent panic from pulling the rug out down the line.

According to Zak, letting algorithms handle parts of your trading can also provide some invaluable emotional support. "While human traders wrestle with their own psychology when the markets grow more unstable, algorithms just keep executing rationally based on the stats rather than getting caught up in all the hysteria." He firmly believes together, human creativity and machine discipline expand possibilities - with each covering for the other's vulnerabilities.

Cultivating a Optimization Mindset

"The best traders are the ones who find the ways to maximize their winners while cutting their losses early. Of course, this is far easier said than done, but if you find ways to overcome those impulses to take profits early or or hold onto losing positions, you will be able to drive home a lot more profit in the long term,” Zak emphasizes. 

Cultivating this skill forms the bedrock of durable trading strategy. This is especially true in high-risk markets.

In Zak's experience, new traders tend to fall into two camps - either cutting winners way too fast and missing out on accelerating gains, or conversely, letting losers deteriorate way too long and wipe out hard-won portfolio value. "You've gotta rigorously train yourself until instantly categorizing and responding to profit-drivers versus loss-leaders becomes second-nature," he says. "It's a skill reaching that point of instinct without hesitation."

Stay Adaptable as New Information Emerges

“The market changes day by day, and new information comes to light all the while. If you're too stubborn to update your ideas when the facts change, then you're gonna keep losing money unnecessarily” Zak cautions. “ “You constantly need to check yourself to make sure that you're not just doing things for habit's sake. The best traders are the ones who hold their own opinions weakly.”

Blind belief despite contradicting evidence is financial suicide in Zach's book. "It's human nature to get attached to our notions of how things should unfold. But markets reward those who adapt quickly based on realities, not those married to static perspectives."

Patience + Preparation = Prime Opportunities

"Wait for high-probability setups with rigorously backtested plans rather than forcing mediocre trades just to feel active," Zach advises, having seen overeager newcomers trip themselves up prematurely many times. "Thoroughly prepare through historical practice across various conditions. Then apply patience guided by the stats until ideal moments arise with defined risk/reward. That's when you strike decisively."

He knows the temptation to override tested rules with "gut instinct" seems irresistible yet routinely proves costly. "When you've built conviction in your process, it gets easier holding out for prime conditions you've backtested hundreds of times - with predefined entries and exits - rather than gambling without an edge."

Refine Your Execution Skills

"Even if you spot high-potential trades, you won't profit without honed instincts to enter and exit on time," Zach notes. "Regularly practice actual trading at market speed using historical charts - like muscle memory for elite athletes. When volatility strikes, that rehearsed reflex makes all the difference between seizing or missing out."

Zach sees masterful execution as a distinctly human skill - cultivated through market simulation and rehearsal. "Backtesting builds knowledge, but real-time repetitions build those incisive reflexes and mental toughness to apply your wisdom profitably. Master traders execute strategies with speed and confidence that only comes from extensive practice."

Final Word

Zak’s trailblazing work shows how volatile markets can reliably build wealth for ordinary folks using responsible strategies, skills and knowledge - not just abundant capital - as tickets to fortunes once solely held by the institutional giants. By transferring veteran knowledge to novice traders through education, Zach is pioneering a new era of inclusive potential.

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Daniel Hall

Business Expert

Daniel Hall is an experienced digital marketer, author and world traveller. He spends a lot of his free time flipping through books and learning about a plethora of topics.

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