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Is volatility your friend?


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25 minutes ago, dmedin said:

Are big, unpredictable swings of price up and down an 'opportunity' as far as you're concerned?

Or is such a situation more like to be a 'danger' and something to avoid taking part in?

They need to be treated with caution (catching falling knives), chasing the market can be problematic, getting filled late but just in time for the whipsaw to take you out, even with the always needed larger stop is common. Like any new news event many prefer to wait for the dust to settle, often after a spike you get a nice channel, today looks more like a flag but at some point consensus will decide direction and that will usually lead to a measured move (either direction) at least as big as the spike and far easier to get aboard.

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Volatility can certainly be your friend if you're on the right side of it. 

I think the most important thing to remember on recent volatility moves such as this one is that they can come at ANY time and therefore your risk management procedures must be rock steady and absolutely geared to unknown moves. Guaranteed stops, trailing, options hedge, vol hedge. Whatever ... just keep on it.

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Reuters headline at 2pm on 15/08/19: Futures show markets headed for sharp fall on trade war deterioration fears!

Reuters headline at 6pm on 15/08/19:  Market rallies as trade war relations improve!

 

I had a vague feeling that trading was a mug's game before, but with the passing of each day I'm starting to feel something like contempt and aversion to this stupidity.

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3 hours ago, dmedin said:

Reuters headline at 2pm on 15/08/19: Futures show markets headed for sharp fall on trade war deterioration fears!

Reuters headline at 6pm on 15/08/19:  Market rallies as trade war relations improve!

 

I had a vague feeling that trading was a mug's game before, but with the passing of each day I'm starting to feel something like contempt and aversion to this stupidity.

Newspapers (and online) are there to sell clicks and reads. Not to accurately reflect the market. 

Also things can change in that space of time! Did you see the last 2 days?!

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I saved this recording of a webinar from a few days ago on Volatility by Chris Weston (formerly of IG). Haven't seen the whole thing yet (60 min) but looks good, covers how to use volatility as a tool to aid trading and uses insider broker info for emphasis.

How to use Realised vol, Implied vol, Risk Reversals, COT, ATRs, BBs and options positioning and lots more.

 

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18 minutes ago, Caseynotes said:

I saved this recording of a webinar from a few days ago on Volatility by Chris Weston (formerly of IG). Haven't seen the whole thing yet (60 min) but looks good, covers how to use volatility as a tool to aid trading and uses insider broker info for emphasis.

How to use Realised vol, Implied vol, Risk Reversals, COT, ATRs, BBs and options positioning and lots more.

 

 

 

Maybe it works for the big/institutional traders ... I doubt it works for the 'retail ****'.

Edited by dmedin
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I'm obviously just too stupid to understand what volatility is.

Reuters has this to say about GDP/USD:

Soft Brexit tones make pair susceptible to flash moves higher owing to thin summer liquidity. (PS/PAS)

But nobody bothers to look at volume.

A nice wee flash is a brilliant way to shake off all the bottom feeding retail clients with their pathetically tight stops.

:D

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On 16/08/2019 at 09:21, Caseynotes said:

you haven't had time to watch it and by the way didn't you once ask how do you use options positioning as an indicator? well it's all there.

In fairness I have not finished watching it yet.  Only managed the first 15 minutes.  Must keep going and finish it tonight.

Options positioning: yes.  Reuters market news mentions them all the time.

Also: strength of individual stocks relative to the index.

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