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.
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