In recent weeks I've received a number of emails asking how I've adapted my trading approach to the volatile conditions we've been experiencing lately. I've also had some people asking when I'll be taking in new students to the STA Training Program as I haven't brought on anyone new for 2020 as of yet, so I thought I should address both items with a quick post.
As far as my trading goes, at the moment I am perfectly content with waiting out the current extreme market volatility until things have calmed a bit. A big part of consistency is knowing when NOT to trade, whether it's for a few minutes of whipsaw action or even a week or two of the current volatility we've seen.
Events like this are exceptionally rare. In fact in my trading career I've only seen one that could compare and that was the Great Recession events of 2008 which introduced a lot of craziness at the time. Back then I was trading Forex almost exclusively and I can remember that pretty much anytime Ben Bernanke spoke the market would go wild, with EUR/USD moving dozens or even hundreds of pips at a time.
It was quite a ride but eventually it stabilized and while volatility remained high, it was no longer leading to the kind of daily extremes and massive intraday moves that made things so difficult to trade in the early days of the market crash. In fact, simply moving off the volatility extremes provided some of the best trading opportunities I have ever seen. The combination of above-average volatility and volumes for months without many major shocks meant nearly every day offered plenty of A+ opportunities with exceptional reward to risk compared to more normal market environments.
I expect the same thing is likely to happen here with our current global economic slowdown. The events we've seen have caused a lot of uncertainty and emotion in the markets and with that the volatility and VIX have spiked but over time things should settle a bit. I don't expect this slowdown to pass quickly but the market will adjust to the experience and will likely be less chaotic in the coming weeks and months.
For those that can be a little patient now there will probably be some excellent trades available that are far less risky than anything that can be traded at the moment. The market may still have sudden jumps and change of directions at time as new events materialize or policy is introduced but they should become less frequent. For us as traders that means plenty of amazing trends, lots of big swings and amazing reward to risk opportunities.
So while I am sitting on my hands for now while the VIX sits around 70 as I type this (we were around 15 before this all started in February) I see some good trading conditions ahead as the volatility begins to drop and the market starts showing a bit more "technical respect" again.
When I do start to trade again I expect I will start with larger stops than usual, even 10+ ticks possibly, but I will also be looking for reward that is similarly increased beyond my normal targets. This will allow me to take some huge runs as market conditions allow.
As things continue and if we see the market stabilise even more with volatility dropping I will continue to move my stops and targets to more normal levels (such as risking 5 ticks for 8 to 20 ticks profit). This may be a gradual process over a number of weeks and it's important to realize that we could still see increases in volatility again and will need to adapt to that.
As far as the STA Training Program is concerned, I'm not in a rush to get that rolling again either. I last took on new students in November and December with plans to potentially take on another sometime in February or March. Once I saw what was happening abroad and the possibility of it affecting markets I decided to wait and now that we are in the midst of a major market event I have no intention of bringing on someone new.
Again, this is a MAJOR market event we are currently experiencing of the kind that might only come by every decade or longer. There's not much use attempting to "learn the ropes" during market volatility like this so I'm perfectly content to wait for a bit more calm and normalcy before trying to bring new traders into the market arena.
As discussed above, once things start to calm there should be exceptional opportunity available with a much clearer technical picture than we're seeing now so at that point I will look at the possibility of new start dates. Whether that's just a few weeks from now or a few months remains to be seen but anyone who is interested in learning to trade can still reach out and we can continue to discuss the possibilities in the weeks ahead.
Please stay healthy and safe out there everyone and remember, the market isn't going anywhere, so keep your powder dry and the good opportunities will come.