Managing Risk During High-Volatility Events
Major economic releases, earnings reports, and geopolitical events can move markets violently and unpredictably. Here's how to manage your risk around them.
Risk Management · April 27, 2026 · 5 min read
Scheduled events — NFP, FOMC meetings, CPI reports, earnings — produce sharp, often unpredictable price moves. Options pricing around these events explicitly prices the expected volatility. For directional traders using traditional stops, these events introduce a specific risk: being correct on direction but stopped out by the initial whipsaw before the real move occurs.
Before the Event: Your Options
You have three approaches to high-volatility events: avoid them entirely (close positions before the event), reduce size (hold smaller positions through the event with wider stops), or fade the initial spike (wait for the first volatile reaction to exhaust itself, then trade in the direction of the eventual resolution). Each approach suits different styles. Scalpers who avoid events tend to get the cleanest risk profile; swing traders who can weather volatility with wide stops can capture the post-event trend.
Spreads and Liquidity Warning
During major events, spreads widen dramatically — often 5–10× normal. This means your effective stop is further than your chart shows. Market orders during announcements can fill 20–50 pips away from your intended level. If you choose to trade around events, use limit orders where possible, understand that execution is uncertain, and size down significantly to account for the widened spreads and increased slippage risk.
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