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Embrace The Volatility Or Ignore It


...while being flexible is a must, it is the speed at which one realizes a flexible change is needed that sets one apart from others.

As I was going through charts last night, it dawned on me that unless you are intimately involved in the financial markets all throughout the day, you may not see the incredible volatility that is taking place.

Taking a step back, it is quite clear to see that we corrected and now we are bouncing: it's as simple as that. For people with money on the sidelines, their thought process is probably something to the effect of "Looks like the markets are still OK. If a sell off happens again, I am going to buy."

It's only when one drills down deep one begins to truly understand just how chaotic and volatile things are, but as I was pondering this I couldn't help but think just how beneficial it would be for people to either embrace the volatility, or ignore it altogether.

I know that sounds a bit silly, but let me explain. I often hear things throughout the day such as just how challenging the environment is, or how wacky the action is underneath. These statements are arguably accurate, but there is no question they come across as negative to traders when in fact traders should look to find the positive opportunities that lie within and take advantage of them for their benefit. It sounds rather selfish, but that is what trading is all about.

There are many times in the tape when trading for a medium term time frame does quite well. Trades that last a few days can add healthy gains as stocks follow basic technical patterns, however we are quickly learning this is not one of those times. This is a time period where I don't believe there is any room for the middle ground.

One can do quite well as an extreme short term trader looking to take advantage of the intraday price swings that have been very extreme, either on the long or short side. If you recognize this and set your mind on such activity, you can do quite well.

At the same time, I do believe we are starting to see stocks become extremely attractive as long as your time frame is much longer than a few days and possibly even a few weeks. Taking a step back to see the bigger picture, you can see many stocks returning to their longer term support or retesting levels at which the stock previously broke out from. This, in my opinion provides excellent points of entry however one should be fully aware that micromanaging these positions will only frustrate you and have you succumbing to the emotional roller coaster that is brought on by the recent volatility.

As I look back over my trading sheets the last few days, these two styles make themselves very clear. I see quite a few intraday trades that have added some excellent gains, while I also see longer term positions I am building starting to creep into the decent gain area despite some significant gyrations along the way. The overnight or multi-day trades, however, aren't so hot and I see red littered throughout on these attempts.

Trading is all about flexibility and quite possibly by the time this is read, and digested, we may be facing another change. One of the biggest lessons I have learned is while being flexible is a must, it is the speed at which one realizes a flexible change is needed that sets one apart from others.
No positions in stocks mentioned.

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