From the Trading Desk

Wild Day on Wall Street

It has been a long time since we have seen volatility like this in a very long time. Stocks finished higher on the session and before anyone gets too excited it will take some time to clear the dust from the past two weeks. Many will be looking to take advantage, but will end up getting burned. Without a solid plan of attack controlling risk and sticking with strong stocks will only end up disaster. There are stocks out there holding up, but given the volatility it may take a bit for solid buy points to present themselves. Stay focused and patience. We do not need to play hero ball. Stay disciplined.

The most interesting story certainly is XIV. Opening down 90% after collapsing due to the rise in the VIX. Low volatility lulled many to sleep and those who were left holding the bag were stung. It also highlights the need to control risk. Why are you risking too much on one trade? There are a few ways to control risk and one being simply using a position size of 1%. Others use a max loss of 1% of their entire account. Either way would have avoided major losses. Risk management is paramount and knowing how much you could lose in one trade is necessary. There is no substitution for this information and implementing in your trading strategy.

Let’s not forget our FANG stocks. They are trading well with AAPL and GOOGL trading below their respective 50-day moving average. Time will tell, but for the most part these stocks are not indicating doom. It will take time and time will help tease out new winners. Stay focused and be ready to pounce as opportunities present themselves.

Not a bad market here, but we are going to continue to see some chop. Will we get another v-shaped rally? There is potential, but given the type of decline it will be more than just a few days of consolidation.

Stay focused and disciplined. Patience will be rewarded.

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