An original GFF Brokers article from February 2022: “How Traders Can Navigate Extreme Market Volatility,” offers valuable strategies for managing turbulent markets. Given the recent surge in market volatility due to new U.S. tariffs, GFF Brokers is publishing an updated version of the article to explore these developments.
To view the original article from February 2022, go to:
https://www.gffbrokers.com/how-traders-can-navigate-extreme-market-volatility/
Updated Context: Navigating Market Volatility Amid Tariff Turmoil
In early April 2025, the U.S. administration implemented sweeping tariffs, including a 10% levy on all imports and significantly higher rates on specific countries—145% on Chinese goods and 20% on European Union imports. These measures, dubbed “Liberation Day” tariffs, led to a sharp market downturn, with the S&P 500 and Dow Jones Industrial Average experiencing significant declines, erasing over $3 trillion in market value.
Investor sentiment has since turned cautious. A JPMorgan survey revealed that 93% of investors expect the S&P 500 to remain at or below 6,000 over the next year, with concerns about potential stagflation and recession risks.
Strategic Adjustments for Traders
1. Monitor Key Support and Resistance Levels
The recent market swings underscore the importance of identifying critical technical levels. For instance, the S&P 500’s sharp decline following tariff announcements highlights how geopolitical events can breach established support zones. Utilizing multi-timeframe analysis can help traders anticipate potential reversal points.
If you can’t see the critical areas where bulls and bears converge and clash, then you are setting yourself up for either a favorable or unfavorable surprise. Navigate the map to get a better sense of where price might hit a speed bump, target, or reversal.
2. Stay Informed on Macro Developments
Tariff policies and international responses are evolving rapidly. Traders should keep abreast of policy changes, such as the 90-day pause on certain reciprocal tariffs announced on April 9, which temporarily stabilized markets. Understanding these shifts can inform trading decisions and risk management strategies.
3. Focus on Sector-Specific Impacts
Certain sectors are more vulnerable to tariff-induced volatility. For example, the semiconductor industry faces challenges due to increased tariffs on Chinese imports and potential supply chain disruptions. Traders might consider focusing on sectors with clearer outlooks or those less affected by trade tensions.
4. Utilize Volatility Indicators
The CBOE Volatility Index (VIX) has spiked in response to tariff announcements, reflecting heightened market uncertainty. Monitoring such indicators can provide insights into market sentiment and help traders adjust their strategies accordingly.
5. Implement Robust Risk Management
In volatile environments, it’s crucial to employ strict risk management techniques. This includes setting appropriate stop-loss orders, adjusting position sizes, and being prepared for rapid market movements. Diversifying portfolios and avoiding overexposure to highly affected sectors can also mitigate risks.
Conclusion: Volatility Presents Opportunities and Risks
The following conclusion was published in the original article from 2022, but it is worth restating as it still holds true today.
While investors typically shy away from volatility, preferring a smoother return trajectory, traders often engage volatility, riding the waves up and down. Similar to how surfers seek decent wave action on a beach, they have to understand the nature of the waters in which they surf. This means understanding the nature of tides and currents, being able to distinguish favorable from dangerous surf conditions, and having the knowledge and capacity to survive should they find themselves stuck in the ocean under hazardous conditions.
The same can be said for trading. If you know where prices are likely to get stuck, reverse, or continue, and if you can understand the economic headwinds and tailwinds surrounding the market environment, then riding the price waves can present rewarding opportunities with possibly muted risks. There are plenty of other ways to engage a volatile market environment. The few we’ve presented above are enough to help you get yourself situated.
Please be aware that the content of this blog is based upon the opinions and research of GFF Brokers and its staff and should not be treated as trade recommendations. There is a substantial risk of loss in trading futures, options and forex. Past performance is not necessarily indicative of future results.
Be advised that there are instances in which stop losses may not trigger. In cases where the market is illiquid–either no buyers or no sellers–or in cases of electronic disruptions, stop losses can fail. And although stop losses can be considered a risk management (loss management) strategy, their function can never be completely guaranteed.
Disclaimer Regarding Hypothetical Performance Results: HYPOTHETICAL PERFORMANCE RESULTS HAVE MANY INHERENT LIMITATIONS, SOME OF WHICH ARE DESCRIBED BELOW. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFITS OR LOSSES SIMILAR TO THOSE SHOWN. IN FACT, THERE ARE FREQUENTLY SHARP DIFFERENCES BETWEEN HYPOTHETICAL PERFORMANCE RESULTS AND THE ACTUAL RESULTS SUBSEQUENTLY ACHIEVED BY ANY PARTICULAR TRADING PROGRAM.
ONE OF THE LIMITATIONS OF HYPOTHETICAL PERFORMANCE RESULTS IS THAT THEY ARE GENERALLY PREPARED WITH THE BENEFIT OF HINDSIGHT. IN ADDITION, HYPOTHETICAL TRADING DOES NOT INVOLVE FINANCIAL RISK, AND NO HYPOTHETICAL TRADING RECORD CAN COMPLETELY ACCOUNT FOR THE IMPACT OF FINANCIAL RISK IN ACTUAL TRADING. FOR EXAMPLE, THE ABILITY TO WITHSTAND LOSSES OR TO ADHERE TO A PARTICULAR TRADING PROGRAM IN SPITE OF TRADING LOSSES ARE MATERIAL POINTS WHICH CAN ALSO ADVERSELY AFFECT ACTUAL TRADING RESULTS. THERE ARE NUMEROUS OTHER FACTORS RELATED TO THE MARKETS IN GENERAL OR TO THE IMPLEMENTATION OF ANY SPECIFIC TRADING PROGRAM WHICH CANNOT BE FULLY ACCOUNTED FOR IN THE PREPARATION OF HYPOTHETICAL PERFORMANCE RESULTS AND ALL OF WHICH CAN ADVERSELY AFFECT ACTUAL TRADING RESULTS.