Holy Cow Batman

Chaos reigns! These markets are giving great opportunities but traders need to evaluate their risk management plans. As recently as 40 years ago, the French were known to put their francs into gold coins called Napoleons (big rooster on the back if I remember rightly) and bury them in their back yards. I'm thinking whether it's time to buy a shovel.

I have always said that I let the market decide when to exit a trade, both in profit taking and loss taking mode. I also said that I run a drop dead stop that I rarely use as I exit on market context.

As volatility increases, I evaluate whether to take profits more quickly or more slowly, depending on what is happening. It makes life more complicated because if there is a quick fast move of, say, 15 ES handles like there was this morning, it would be a shame to just take 2 points out of it. On the other hand, when the market is chopping around, even in a volatile fashion, taking 2 points out of all the up and down chops can give a nice green end of day.

Monitoring order flow and relative volume can give a lot of information. Do you look at the volume at set times throughout the day (say every 2 hours) to check whether it was a high, low or regular volume day? If not, you are missing a valuable piece of information. Generally, very high or very low volume can create volatility. Low volume volatility is not pleasant to trade and I pack my bags when I see that. On the other hand, high volume volatility is a real pleasure to trade, but adjustments need to be made to meet your risk management rules. Sometimes, adjusting size does it in conjunction with moving your drop dead stop out of the way.

The large range days can be a challenge for context although if there are single prints around they can give you stakes in the ground on the Profile to help. This mornings 15 point drop in the ES was helped by a single print zipper which clued me in to the possibility of the pot hole with just air below. Envisioning the possibilities is a key part of my daily strategy.

Tying this all up to the title of this post, it looks like the 360 million strong Euro zone and China, along with the unsettled U.S. environment, will pull and push markets around vigorously and we should try and take advantage of it while it's here. The usual summer doldrums may have a few tsunamis thrown in.