Welcome Back Volatility!


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When it comes to short-term trading, next to having adequate liquidity to enter and exit positions with little to no slippage is having high volatility. Day-traders that focus on trading stocks can typically find a few stocks that are gapping or moving on news early morning at least. However in times of low volatility, most stocks churn from that point. Those day-trading with a focus on the broader market indices (e-minis or ETFs) have had a more difficult time. That’s changing.


The week before last, the Volatility Index ($VIX.X) made a reversal at the 17 area (red dashed line) (also see last week’s Chart of the Week) that provided a very short-term reversal signal. Last week, the VIX moved up to the next reference high in the 21 area. These highs have provided good short-term low points in the broader markets. Pristine Tip: prior highs in the VIX have historically aligned with reversal lows in the broader markets. It gets better...


This next chart is a daily of the Dow Jones 30 with a 3-day average range. What has happened now is that with volatility moving higher - the daily ranges have also increase substantially. This is great news for those trading the broader markets. The recent average range for the Dow has been in the 300 point area. With ranges like this it opens the door to good size moves up and down the same day. While stock traders tend to say with the same trend (up or down) during the day, market traders will more often trade long and short on the same day. Of course, this is excluding those power-trend days.

If you are an equity e-mini or ETF trader, you know the last few years have not been the best since the daily ranges contracted. There have also been long intra-day periods of the market moving in relatively narrow ranges. This recently ended and I am hopeful and optimistic that it is going to continue. Trading e-mines offer several advantages over trading stocks and ETFs as a day-trader. Two being the leverage and tax advantages they offer. Technically, they tend to be superior at following the basics of technical analysis concepts also. Reason being, that is really all there is to trading them since there are no fundamentals to them.


The above chart shows some of the setups there where on Friday in the mini Dow contract. As I said, the ranges have expanded and that is what is needed to make trading these markets worth trading them and the advantages they offer. As great as the leverage is, if whatever it is that you are interested to trade isn’t moving as needed, it doesn’t offer the probabilities to profit needed to trade. They are moving now!

If you are interested in trading these equity e-mini markets (there are others besides the Dow; S&Ps, Nasdaq 100 and Russell 2000) we have a class starting this coming weekend that focuses on just these instruments. These e-minis do not require the $25,000 dollar minimum to trade them as stocks do since the day trader pattern rule does not apply. Also the amount need to trade is small.

Stocks have been great for day trading and with the higher volatility I expect it will get better. That being said, all traders should be diversified on the instruments they trade. Opportunities and environments change. Especially for day traders, so having other options to trade is important. BTW, trading options themselves is another way to take advantage of trading ideas. Each tradable instrument has its foundational basics and nuances to learn. Of course that’s why we have courses for each.

Attend this week’s After Market Lessons to learn more or contact [email protected]. I believe that the year’s end is going to offer some of the greatest trading opportunities of the year. Now is the time to learn!

Greg Capra
President & CEO
Pristine Capital Holdings, Inc.
Pristine.com Trading
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