Trading Nation

Three market do's (and three market don'ts) for volatile trading

VIDEO3:3503:35
Three market do's (and three market don'ts) for volatile trading

Markets have been on a wild ride this year.

The S&P 500 hit a high of nearly 3,400 in February before bottoming out below 2,200 in March. It remains 4% from record highs.

CNBC's "Fast Money" traders Tim Seymour and Guy Adami stopped by "Trading Nation" on Friday to share their top market do's and major market don'ts.

Do #1: Remember bad news can be good news

"Do remember that bad news has been good news for equities and remember that the Fed is really the reason why markets are higher," said Seymour. "So do remember that the Fed controls liquidity and be careful for when the Fed may start to pull back." 

Do #2: Do your homework

"You're the one that ultimately is making the decision as to what you're going to buy or what you're going to sell. You can listen to a lot of people, but the decision is yours," Adami said.

Do #3: Have a plan

"Do have a plan before you put on a trade. The most important thing you can do is know where to get out when you're wrong. You also need to know when to scale out if you're right. If you have that plan in place, you're doing it right," said Adami. 

Don't #1: Execute short-term trades on long-term views

"You have a market here where volatility has been an enormous part of how the emotions have taken a part of this. But if you have a company like Disney, and you have a long-term view on recovery, don't necessarily be concerned about the headlines on reopening," said Seymour. 

Don't #2: Allow emotions to take over

"You've got to take emotion out of the equation, and going back to one of my do's, if you do have a plan, almost by definition having a plan helps you take emotion out. So don't be emotional when it comes to trading," said Adami. 

Don't #3: Forget about the balance sheet

"Don't forget that ultimately this might be a credit crisis," said Seymour. "The slowing economy is going to have credit implications. So don't forget that a good balance sheet never lies, whereas a bad balance sheet can be very noisy and sometimes can mask in the short run liquidity support and dynamics that may be coming from the central bank when in fact, ultimately, a bad balance sheet in an environment where, I think, credit is undoubtedly getting worse is not going to be your friend."

Disclaimer