Traders See Profits Evaporate in Minutes as Trump Convulses Bets
The financial markets are no strangers to volatility, but the past few weeks have been exceptionally brutal for traders. Whether you're trading forex, equities, or bonds, the rapid shifts in market sentiment have made it nearly impossible to maintain a firm grip on profits. If you've lost a few trades recently, rest assured—you’re not the only one.
Market Chaos and Unpredictability
The latest wave of volatility stems from former U.S. President Donald Trump's influence on trade policy, sending shockwaves through global markets. Traders betting on stability have been caught off guard as swift reversals have become the norm.
“The market is trying to predict and trade off a very unpredictable situation and person,” said Antony Foster, head of G10 spot trading at Nomura International Plc. “You could look like a hero one minute, only for the situation to turn on a sixpence and you look like a zero the next.”
With policies shifting overnight and economic data releases causing unexpected market swings, traders have been forced to abandon traditional strategies and adopt more flexible approaches.
FX Options Trading Volumes Surge
As traders scramble to hedge their risks, trading volumes in the $300 billion-plus foreign-exchange options market have surged to multi-year highs. According to Bloomberg, a measure of 10-day realized volatility on Asian stocks has hit its highest level since October. The unpredictability has pushed traders to adjust their strategies, increasing hedging activities while reducing directional bets.
Calvin Yeoh, portfolio manager at hedge fund Blue Edge Advisors Pte, explains the dilemma: “The path of markets that would take weeks is being compressed into days—sometimes even hours. Increasingly violent intra-day swings are forcing traders to reconsider how they measure volatility.”
Shorter Timeframes, Faster Trades
As markets react to geopolitical and economic developments at breakneck speed, holding positions for extended periods has become riskier than ever. According to George Boubouras, head of research at K2 Asset Management, traders are reducing the lifespan of their positions.
“The positions are getting very short-dated, less than 24 hours, when in some cases before, days or a week were the norm,” Boubouras said.
This shift is evident in forex trading, where market participants have had to adjust quickly to the latest developments. The Canadian dollar, for example, saw massive swings when Trump imposed 25% tariffs on Canada—only to retract them days later. Traders caught on the wrong side of these moves suffered significant losses.
A New Approach: React, Not Predict
Given the difficulty of forecasting market direction, some hedge funds have shifted from directional trading to a more reactive approach. Singapore-based multi-strategy hedge fund GAO Capital has transitioned from shorting volatility to buying it, capitalizing on the rapid price swings rather than betting on long-term trends.
The equity markets are seeing a similar trend. Investors are turning to complex hedging strategies to navigate heightened volatility, but the problem is that options—usually a go-to risk management tool—are becoming increasingly expensive.
Ling Zhou, head of equity derivatives strategy at TD Securities, pointed out that one prevailing trade has been betting on China. “The idea is that the worst-case scenario is already priced in, and Beijing might roll out additional stimulus,” Zhou noted. Option volumes for China-focused ETFs like the iShares China Large-Cap ETF have surged in recent months.
Bond Markets in Turmoil
Even bond traders are facing challenges. The uncertainty surrounding U.S. inflation and Federal Reserve policy has complicated the outlook for Treasuries. Some traders are now considering the possibility of interest rate hikes, adding another layer of complexity.
“Inflation is the kryptonite of bond investors,” said George Catrambone, head of fixed income at DWS Americas. “If you’re trying to trade this market, you have to be really, really fast because the episodes of volatility have become much shorter.”
What Can Traders Do?
Given these market conditions, here are a few ways traders can adapt:
Reduce Position Sizes – Lowering exposure can help mitigate risk in unpredictable markets.
Use Options for Hedging – Although expensive, options can still provide protection against extreme volatility.
Shorten Holding Periods – Markets are moving rapidly; being agile and quick to take profits can be beneficial.
Monitor Key Events Closely – Stay updated on geopolitical developments, central bank statements, and macroeconomic data.
Diversify Across Assets – Avoid overexposure to a single currency pair or asset class.
Final Thoughts
No trader is immune to losses, especially in an environment as turbulent as today’s. If you’ve found yourself on the wrong side of a trade, you’re not alone. The key is to adapt, stay informed, and implement risk management strategies that can withstand unpredictable market movements.
The best traders aren’t those who never lose—they’re the ones who manage their losses effectively and come back stronger. Stay nimble, stay disciplined, and most importantly, stay in the game.
Disclaimer: Trading forex and CFDs involves significant risk and may not be suitable for all investors. Always conduct thorough research and consult with a financial advisor before making investment decisions.
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