Today was one of those tradings days where you could see what was coming but it wasn't necessarily easy to take advantage of the moves. From early on in our live class this morning I was talking about the distinct possibility for the "bottom to fall out of the market" and even though it seemed a likely event it still took a number of attempts to make the move. Read more
What you may notice from today's trading results on the ES and NQ are two things. First, that I'm still not trading all that often considering the market movement. Second, that despite that I've managed to string a nice series of wins together so far this week.
To the first point, the scarcity of trades has to do with trying to be careful during volatile times but there's also a bit of bad luck in there too. Today in the ES I only managed to catch a couple short trades but in an ideal world I might have had four or five on the nice run down and then eventually a long on the reversal. Today was just one of those days where I wasn't able to get my fill. Oh well, it happens.
With the summer starting to come to a close I've decided to put some of my recent research and testing aside for a while and thought I would share some more recaps. I've actually been thinking about trying to get some of these up for at least a few weeks if only because this August has been so far outside the norm.
There's no way to exactly predict how each month or season will play out in the markets but there are some common threads. Yes, the Santa Clause Rally is a thing and we usually see stocks head up into the holidays but not always, as evidenced by last year's big drop. Then we tend to start a bit slow in January and pick up steam over the spring. From there when we hit July and August the volume and volatility usually tapers off as there's less big news, fewer earnings reports and less traders at their desks. I guess they're all off in the Hamptons.
Here we are, heading towards the summer and the market is doing its typical thing – just some massively volatile moves and panic over a good, old-fashioned trade war! Wait, that doesn’t sound quite right.
Yes, things are a bit different in May after a relatively slow and quiet April. It seems the switch has been flipped thanks to plenty of incendiary headlines on trade and the political climate both in the US and abroad.
I often get asked what I change in my Emini S&P 500 (ES) trading when volatility spikes but the answer remains the same – I just stick with the system. I make small adaptations to take bigger profits when available thanks to the larger swings but I still keep stops small. This greater reward to risk helps to balance out the increased number of whipsaws we see from volatility and often sees our trading expectancy increase even with a lower win rate.
That’s the thing about my ES trading, I keep it simple and stick with what works. I don’t make sweeping changes when it’s a difficult week or I take a few losing trades in a row. I just follow the plan and let the edge play out.
Today was all about targets. I was only "right" half the time but it didn't matter. I targeted my trades well.
In these Journal posts I've been talking about adaptability quite a bit recently and today was a case where the adaptable trader should have taken full advantage. Swings were large, momentum was high and opening up profit targets to look for more distant areas made sense.