How to Adjust to Increased Market Volatility

Significantly higher volume and wider daily trading ranges create greater opportunity for traders / investors who make the necessary adjustments.

Rational Perspective: greater opportunity equals increased risk.

Reasonable Expectation: either a) stops need to widen or b) a different contract fitting your risk profile needs to be selected. For example, if you are trading the ES and are not comfortable with the wider stops required, then you have the option of trading the 10 Yr. Note to satisfy your risk profile, and still benefit from increased volatility.

Rational Perspective: increased volatility requires extreme patience when trading resistance levels.

Reasonable Expectation: both price and confirmation of momentum are required to validate a pullback. For example it is not enough for the market to retrace to an area of resistance (price). You must wait for evidence of price rejection to validate momentum supports your position.

Rational Perspective: Successful traders maintain consistent behavior no matter how much volatility increases or decreases.

Reasonable Expectation: Your trader profile is responsible for your success. Adjust your perspective to maintain it. For example if your profile has you ‘hitting Singles’ then keep hitting Singles by adjusting profit targets. If a ‘Single’ is defined by a target of x when volatility is y, then make sure you consistently adjust for increased (or decreased) volatility.

Rational Perspective: When volatility appears it alerts us to expect increased market activity for an extended period of time. Go back and review a Daily ES Chart from August 2015 into Q1 of 2016.

Reasonable Expectation: Take a step back to define the adjustments you need to make, craft a plan to achieve them, and commit to working your plan. Please note it is reasonable to secure the training, tools, and comprehensive development support needed to see and fill the gaps keeping you from the success you desire.