Well, what can I say?  What a wild week it was.  As a firm we had been noticing some of the signs that the sentiment in the market could be changing, but who could have expected what we got on Thursday and Friday.  The volatility was crazy as fear seemed to grip the market, and it seemed that many traders were unloading positions.  I know many people are concerned about the news out of Greece and the effect it is going to have on the euro.  Whatever the reason, the volatility has spiked with the VIX for the week going up 88%.  I had noticed early in the week that I had been trading very sloppy, and after sitting down with Eric on Wednesday realized it was because I wasn’t making the necessary adjustments to this changing trading environment.  After going home and going through my trades I found out where I was going wrong in my thought process.  Here are some of the adjustments that I am making in my trading.  

  • Trading with smaller share size.  This I think is the biggest adjustment traders need to be making right now.  With the larger ranges in most stocks you have to be willing to risk more on each trade.  You don’t want to be shaken out of good trades so lowering your share size will enable you to hold trades through some of the noise.  Plus there have been more and more opportunities late in the day, so the last thing you want to happen is to have a bad morning and have no chance to make it back later in the day because you have hit your stop out for the day.  Personally I have been trading with about 1/2 of my normal positions size but that is up to the individual trader to figure out.  
  • Entries and exits are based more on momentum.  Now this is more of a personal adjustment to my trading.  The direction I am trading in is still based on the higher timeframes but scaling into and out of positions is more important with the VIX at these levels.  Stocks are not just pausing at support and resistance levels but they are bouncing hard.  If you are not properly scaling into and out of positions you are taking on too much risk in this market.  
  • Wait for a stock to bounce before you short.  The fear that grips a weak market causes many stocks to move fast and quick to the downside.  Many traders who miss a short tend to chase and get in at the absolute worst time.  Many of the programs we are trading against wait for this extreme downmove and buy the second momentum slows.  Chasing a stock plays into their hands.  Wait for a bounce, be patient for that upside momentum to slow, then establish a short at a good risk/reward level.  The worst feeling in the world is at the end of the day a stock is down three points, you have been short all day, and you end the day down because of bad trade management.  

This market is beginning to get interesting and I personally can’t wait to get back in the office.  Remember preparation for the day is key and be ready for anything.  In this volatile market there can be no uncertainty in what you are going to do next.  Good luck in your trading and have a good week.  


Tagged: day trader, day trading swing trading prop firms, equity prop firm, intra day trading, prop firms, propprietary firms