Dealing With Volatility

Getting the Mindset to Trade

Today’s market action continued the down moves of last week and seemed to rattle traders everywhere. Some posts on social media seemed to range from shock to bewilderment. Some records are being made as stock markets around the world trying to find some footing.

With a more helpful mindset, there’s really no need to be surprised by what the markets do, up or down. One of my favorite sayings is, “The market will do what the market will do.” In other words, the market may go up or down and my job as a trader is to participate with the moves along the way.

That is not predicting. That is taking on the mindset that you need to measure what the market is doing and jump on whatever trend in prices that present themselves along the way in order to profit. No surprises!

As many of you probably remember from my recent book, The All-Weather Trader, I trade a lot of various markets up and down, using some 5 different indicators, 7 strategies and 5 different time frames. Starting with some short term time frames stocks started looking shaky back in early July. After a couple of failed rallies upward, the trend down continues.

The longest term indicators I use, went over last Friday, making it unanimous. The trend was down across the board in all indicators and time periods at that point. I didn’t predict a single thing in taking on more short positions. I positioned my mindset to be ready to deal with up, down or sideways price action. The price action kept deteriorating, so I kept getting more and more short. I’m now short in 29 of the 35 markets I trade across the entire portfolio.

The volatility out there is definitely increasing lately. I don’t let it bother me in the slightest. My position sizing helps keep me centered on the process. I outlined that in my book on position sizing. The more volatility increases, the smaller my positions become. That moves my portfolio to more consistency and keeps any one day from being that much different than any other day.

This afternoon, I will once again get my daily data, run my process, move my stops just like I do every other afternoon. Wash, rinse, repeat and enjoy the ride!