I’ve received many emails over the past few weeks with questions and comments something like – do your trading strategies work in this volatile market? The insinuation is there are different strategies for more or less volatile markets.
Markets have not changed.
Yes, we have much wider range days than in the very recent past. But the exact same trading strategies used in low volatility markets are used in high volatility markets. Reversals are still made at the same price and time targets, dual time frame momentum is still the ideal filter to identify potential trade setups. The typical patterns made for trends and counter-trends have not changed in any time frame. Nothing has changed to make the same entry and exit strategies of low volatility markets less effective in high volatility markets.
I don’t want to step on any toes or make any one reading this feel bad, but having the idea that successful trade strategies are different for low or high volatility markets is a clear sign of an inexperienced trader.
You will often have to have more initial capital exposure for the same trade setup in a more volatile market than in a less volatile market. But that is easy to adjust for. Either trade smaller size or less leverage. The High Probability Trading Strategies book describes a simple formula to determine the maximum position size for any potential trade setup. If you have already read the book, you know that I’m a big advocate of low to no leverage until you have developed a consistently successful trading plan with consistent, real-world profitable results.
Not only are the old, proven trade strategies still relevant to today’s volatile markets, the high volatility of the past few months have offered some of the best trading opportunities in years.