With the $VIX  above 20 and volatility coming back in vogue you must refine and massage your normal day trading. I usually am what I like to call an “intra day trend trader”. I usually try to find a spot and hold on for as long as the trend is working intra day on my 2 and 5 min timeframes.  When volatility rises though I have to make some refinements. I like to work my positions by taking off a good size chunk on any quick moves and book that gain and hold the rest anywhere from 1/3 to 1/2 of the position on to see if a trend can develop.  I also like to make sure that I narrow my focus on the number of stocks I trade or if I even trade individual names at all.

When the tape is moving fast and free I don’t feel the need to keep jumping from different vehicle to different vehicle because they are all moving well. I have been commenting to the traders I mentor that I am concentrating much more on the index etf’s now. They are not made for reading the tape like an individual name but for trading against levels. In the $SPY for instance right now you can trade it from”dollar to dollar or  figure to figure”. What I mean is the SPY is moving from say 137 to 136 maybe on to 135 then back to 136, you get the idea. Hey this is not rocket science but it works. The SPY holds a level I’m long with the next figure as a target and visa versa. With some patience it works because the SPY has expanded its range and is moving well. If I trade a stock I am trying to find a good mover that can trade clean and use  the levels the same way. I don’t have to be constantly jumping around and chasing. When volatility is rising patience pays because stocks find their way to big levels you don’t need to do much in between.

I also look for things like first hour highs and lows to trade against. With volatility, the bounces against the trend can be bigger so be careful not to chase thinking an absolute bottom or top has been put in. Chasing in this tape is especially hazardous. Use simple criteria like higher lows and lower highs to trade against..they work and give easily defined risk.  The stop hunting algorithms are providing some great vertical moves both higher and lower to fade, learn to identify what’s a stop run and what’s not and profit from other day traders chasing or bailing at the wrong time. The headline risk in the tape can be frustrating but with the tape moving so free mistakes can be made up easily. Come to work with a plan and have the confidence to execute it.

Ok I know you’re probably saying “What’s up with this guy?  Salsa Dancing, NYC Bus System, and Whack-A-Mole…now Tattoos’ and trading”. Well if you have been trading for any period of time you have most likely been tattooed at one point or another. Once you get tattooed for real it is there to stay it doesn’t just wash off. You are now the proud owner of a tattoo on your trading psyche.

Tattoos’ are sometimes famous for the circumstances that surround their birth in to existence. Was it a conscious well thought out decision or the result of a night or series of nights in which conscious well thought out decisions were not remotely within the realm of possibility?  It matters. A tattoo that was planned and picked with you knowing exactly what one was doing is usually worn with pride. Whereas the less thought out, spur of the moment alcohol or love induced tattoo may not be something one is anxious to show the world.

In trading being tattooed is much the same. Did you get tattooed in a trade that wasn’t well thought out in a moment of revenge trading or the classic “get back what was taken from me” trade? Did you opt to only think about that moment and not what this moment may imprint on the future?  Or was it a well thought out planned trade that just happened to encounter the law of probabilities and it was your turn for a tattooing?  One type of tattooing reminds you of loss of discipline and pain. The other although painful reminds you of why you keep your discipline so this happens less frequently.

What types of tattoos’ are you inked with? If you are tattooed from trading on tilt, revenge trading and a host of other brain seized strokes of undisciplined behavior, you need to be heading to the closet and finding a long sleeved turtleneck. The tattoos’ are there but you have to find a way to put them out of sight. Cover them up and move on. Vow to not make decisions that are going to harm your trading. When you sit down to trade wearing that turtleneck wear it with pride! Let it be a reminder that you have moved past the days of unplanned tattooing.

Jeff Davis      @Shaq48_Trading    [email protected]