Hello Tackle Traders,
Tis the season traders! The most wonderful time of the year is once again upon us and as everyone one is busy getting their Christmas decorations and shopping lists checked off, Santa forgot to set his alarm close because the Santa Clauss rally we’ve come to expect is late for the party. It seems that by the time we actually get a rally if, in fact, we get one, we’ll be throwing out the Christmas trees and leftovers from the fridge. So what’s one to do when the norm is not the norm?
I’m sure we can all agree that the market volatility we’ve been experiencing lately has us a bit frustrated. The whipsaw of these huge ups and downs of the market movement certainly have us sitting at the edge of our seats wondering when it will end. Since the S&P broke support on October 10th the market started to form a reverse head and shoulder pattern and like most, I was patiently waiting for it to break above the neckline so I can be bullish again but it couldn’t even complete the second shoulder before getting smacked right back down. When the market double bottomed, and it was off to the races to see if it would form the W pattern. The bulls saw a glimpse of hope after the US and China presidents weekend dinner date on December 1st. The market gapped up and even pierced through 2800 only to get shot down after Tarif Man started tweeting about the deal and the bears came with vengeance refusing to let up all week and on Friday we closed with yet another pattern, this time the M. Who knows were we’ll end up this week but I’ve got my popcorn ready and my fingers ready to left click once a winner is declared this week. LOL!
These last few weeks have certainly tested my patience with the market but in spite of that, I’ve done something that I wasn’t able to do the last time we had this much up and down movement. In January of 2016, we experienced something similar to what we’re seeing today though it was short lived and lasted about a month. I got whipsawed by the quick market movement and I took a break and sat on the sidelines missing out on the ride up after the market settled down and picked a direction. I’m now learning that rather than get out of the game entirely, making some adjustments is a better play. Trading is a business and therefore should be treated as such. When other businesses have losses in revenue they make adjustments. They don’t shut their doors while they figure out what they need to do to turn the business around, they remain open for business and work things out on the go. If you had a retail store and you order a lot of inventory in anticipation that consumers will flood your store during the holiday season but you don’t see the volume you were expecting, you wouldn’t close your doors to figure out how to get rid of that inventory, you’d be open for business as usual with buy one, get one free signs all over the store. As traders, we need to learn to do the same thing. The systems we trade work when we follow the rules and when business gets a bit challenging, you might have to make minor adjustments to the rules without changing the system. What I mean is this. If your trading rule for the naked put system is a 25 delta, then maybe in a volatile market such as the one we have, you trade a 10 or 15 delta to give your trade a little more room to breathe. Perhaps it means you adjust your position sizing and have more cash on hand and fewer trades in the market. If you are a buyer of options and trade directional then maybe you need to buy more time than you normally do to give yourself more time and if you are a seller sell lower deltas to give yourself a higher probability of winning. You might even be getting the same amount of credit because high volatility increases the premiums. Speaking of volatility how about “ The VIX”! This sucker went unnoticed 2017 with the chart looking lifeless almost about to flatline but that’s not the case in 2018. The VIX has resurrected and has resumed it’s normal heart rate in the 20-25 range.
This is nothing new under the sun guys. You’ve heard the coaches talk about this over and over again aIf you are a new trader and have yet to trade in this type of environment, I get it. It can get frustrating and you might begin to feel as though trading is not your cup of tea. I know, I felt that way myself but I encourage you to stick with it and get help if you need it and keep papertrading. We have plenty of resources available to help you along the way.
Until next time traders!
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- Emily Muiruri, an Entrepreneur, Real Estate Agent and Business owner. Born and raised in Nairobi, Kenya before her family moved and settled in Maryland. She began her trading journey in January 2015 after 17 years of Property Management in the Self-Storage Industry. Emily uses different strategies to trades stocks, options and forex. Although still a student learning and enhancing her trading skills, she has strong desire to teach women to take control of their finances and become traders. Writing blogs is one of the ways she’s is looking to spread the word and get more women involved. Emily knows that with the right education and trading system women can be successful traders
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