On Demand

All Of This Can Make You Crazy

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Now I am one who believes there are forces at work in the universe that we know nothing about, forces that to our unknowing sensibilities would seem, well, incomprehensible, much like a jet would seem to a caveman.  I don’t want to carry this too far, but I have noticed recently that the market seems to be tracking my life.  I know, I know, this is a big statement, but the truth is the volatility in the market is eerily similar to the up and down of my life.  Oh, heck, I don’t know.  This idea seems pretty far-fetched, even for me.  Oh, wait!  Maybe my life is tracking the market.  Okay, that is enough.  Let me just say that both my life and the market are coincidentally going up and down to a degree that is uncommon, if not rare.  

In the past month, the Dow Jones Industrial Average has seen an extraordinary number of triple-digit market swings.  The DJIA moved up or down by over 100-points 68% of the time –15 of the last 22 trading days – and the number is even higher if you track only intraday swings.  It may not be unprecedented volatility, particularly compared to 2008, but the current roller coaster ride is unique, frustrating, and by many accounts, expected to continue.

The point here is that the market volatility is difficult to trade, even for professional traders.  At least this is what I have heard from a number of professional money managers/traders/investors.  Speaking strictly for me, it seems almost impossible, and I track geo-political/economic/market events daily.  Hey, but who am I anyway?  There are plenty of folks reading this who are far more suited to the ins and outs of intraday and day trading.

A second point, then, is that just because I can’t do it, it doesn’t mean you can’t.  You see, as much as I preach that knowing the macro picture is integral to successful trading/investing, watching the minute details of a chart can show you as much as you need to know for a market trading on chart movement, as well as headline news.  I can’t speak authoritatively to this, but I have been around this long enough to know intraday traders, day traders and super-computers can track and exploit chart movement successfully.  If you do try this intense trading, though, keep in mind the words of Alec Young, Equity Strategist at Standard & Poor's …

Even if the benchmark indexes are flat or down for the year, volatility can be your ally, especially for active investors.  "There's huge potential for a smart trader to exploit these swings," Young says, adding caution "that most traders don't make money."

So, if you like the rush of intraday trading or you simply are good at day trading, figure how to trade the volatility because it is here and it looks as if it will remain here of awhile.  Hmmm … Now, that is interesting.  I opened this column with the notion that somehow the market was supernaturally tracking my life, but I am ending with the idea that the up and down of the market will continue.  This is interesting because I don’t believe for one minute that my life will be up and down for much longer.  We all pass through “stuff” and then we get better.  Whoa!  Maybe the market is just passing through some “stuff” and it will get better as I do.  Whoa!  Enough!  I am making myself crazy.   

Trade in the day – Invest in your life …

Trader Ed

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About the Author

Hello, I am Trader Ed.  No, not Mister Ed, although at times I feel a bit like a talking horse.  You see, my job is to educate folks about the market, which means talking about (or writing in this case) anything and everything that affects the market.  This means the world is my oyster.  Every day, I read for about an hour or so about the happenings in the world.  Every day, I look for leading indicators that will help me “see the future.”  No, I am not an oracle, nor do I pretend to be, but I do look for macro trends that point in a direction, and I am more than happy to share my “vision” with you.  Keep in mind, though, my vision derives from analyzing the fundamentals of the global economy, as well as looking at current movement in the market.  I shun the doomsayers and I embrace the realists.  I look to the positive without denying the negative.  In short, I paint as realistic a picture of the market as I can.  So, if you have a question in this realm, feel free to ask me.  I will answer you in this column and I will do that to the best of my ability.

Hoping to hear from you.

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