Volatility Is Back and Question About Home Run

As I explained weeks ago, volatility would be back. And here we are, the volatility index (VIX) has printed a new high for the year today. People were laughing back then questioning my sanity. It does not prove me right and that they are wrong. Instead, it simply shows human ignorance is everywhere.

As a principle, anything that has a cycle will go through expansion and compression phases. The longer the compression, the longer the expansion that follows. Since we have experienced one of the longest compression phases in recent history, the expansion phase is likely to be spectacular in terms of range expansion and intraday volatilities.

Many people associate volatility in the stock market with market crashes. That can happen, of course. But volatility is not a one-way street. A trader may be correct with a longer term directional opinion but such opinion is not good for the bottom line if not outright deadly.

In high volatility environment, the extreme swings we get on intraday basis will test the resolve for even the best traders around. Prudent risk management is key to survival in such chaotic environment. For those less experienced traders, reducing trading size and staying on the sideline are good alternatives to brave this trading environment because of the real threat of being wiped out.

Trading Goal For The Year

As of yesterday, thanks to the higher volatility, I have reached my trading goal for the year. This year is a new record for me in reaching my year end target so early. It is something to celebrate indeed. I will take it easy on my regular trading and focus more on other tasks on hand until the end of this year.

Frankly, I am not the aggressive type in terms of trading with leverage. Otherwise I would be trading at several times the leverage I am using. That being said, I prefer consistency and stability in performance. Getting my year end goal and stop / reduce trading is another control I put on myself.

Time spent researching and studying the markets are as important as spending time to trade. Since the stock markets are evolving all the time, we have to upgrade ourselves consistently too so that we are aware of the changes in the trading environment. As I said often, traders ultimate edge is themselves.

For traders, investing in themselves to gain more knowledge about the markets they trade will be reflected in the performance gradually. Those who fall behind in terms of keeping up with the current market conditions will suffer more setbacks and instability with their trading results.

About Home Run Targets

I received a question about my real-time commentary:

I am sure I am not alone among subscribers to DaytradingBias who marvel at LC’s home run targets. IMO, these are the most valuable biases in the commentaries.

Today’s ES target of R1, reached in the 3:00 PM hour is typical of what I mean.

LC, can you give a primer, by the numbers, on how you arrive at these probables?

In short, I have 3 separate and independent methods to measure potential important price levels. First, it is the price clusters based on STOPD which is already implemented in the real-time price level tool. Second, is a swing pattern driven price targeting tool that dynamically update on my charts. Third, I have real-time statistical bias information generated giving me which price levels are likely to be tagged within the day as the day develops.

When at least 2 of these price level methods coincide at the same price zone, I know immediately there is a high probability that the particular target is of great interest to the dominating players.

As I explained in STOPD, it is not the entry that matters. It is knowing where you exit that makes you a winner.

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