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How to play the game

Blog - How to play the game


Market Volatility


Stock Market Volatility..... you either love it or you hate it.... in the same way you either love your cat unconditionally or you hate it because it keeps shitting in the garden vegetables.... either way - there's a most definite reaction and preference.

Personally.... I don't like the cat shitting in my food.... and I don't like volatility.... I've had an incredible time of it since I started Trend Trading, and the cat is no longer welcome in my home - it can piss off as far as I'm concerned.

Since the initial Market correction in February 2018 ... there have been a few false dawns, we've seen strong moves to the upside followed by even stronger moves to the down side.... we've seen Mr President open his mouth and the market reacting... we're seeing an incredibly positive Earnings Season go largely unnoticed by Wall Street and we're now seeing Key Support levels start to break down once more.

We're seeing key stocks (like Apple) fall like a 20lb rock being dropped into the lake and we're seeing Google / Amazon and the Tech Juggernauts showing real weakness for the 1st time in a few years.... this is volatility... how long is it here for? Who knows.... but I say it time and time again - price will dictate.... all we can simply do as Technical Traders is react to the information we are presented with. 

So how do we play volatility as a Trend Trader?

It really is simple - we either identify alternative markets that ARE moving OR we stand aside - this is the measured and sensible approach.

This way of thinking usually means we have the FOMO (Fear of Missing Out)... but the 1 thing it certainly does is protect downside. Entering the Markets when we cannot accurately determine the direction is what sets good traders apart from those who act blindly, and when faced with the prospect of increased volatility... standing aside and letting the Day Traders (95% Failure Rate) kill each other is the correct approach and when all is said and done.... we will move in when we have clear direction either to the Upside or the Down side.

The current news event we're dealing with is the Trump vs China Trade War (updated this blog on 11th July 2018), and although price is steadily increasing overall over the last week... we are always likely to see sharp down turns due to short term news events and volatility - this is where Trade management every day is important... as a Trend develops - block in profit by adjusting your stop loss - this usually protects against sharp moves to the down side and can preserve profits.

Dealing with a Summer Market is notoriously choppy also, therefore, the approach of profit blocking, can yield good results during choppy times... as a Trend Trader, we clearly have a bias of buying and holding for weeks/months (which is our usual time horizon) - but it's perfectly ok to be stopped out of a trade at profit during these types of Market conditions. I like stress free trading - and I think the above approach is both logical and stress free.

False dawns are also part and parcel of Volatility.... finding high probability environments for re-entry are obviously crucial... but if the major indices start to "range" then we could see volatility continue for quite some time.

I personally won't allow my cat to shit in the vegetables.... and I won't allow a volatile market cripple my Trading Account... I refuse to be caught in the hurricane.... the best way to avoid a hurricane?

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Sam McCallumComment