Unusual markets call for unusual thinking. What do I mean by that? Over the course of the last few weeks, the market has been more volatile than at any time in my experience. With emotional trading at a peak, the moves in the indices have been incredible.
Because of the volatility, trading tools that I normally use are not as reliable… the timeframes I normally look at are not as reliable… correlations between investments are out of whack.
Let me explain.
Under normal circumstances, I look at daily charts for trade opportunities. Because of the extreme volatility of late, I am applying the same indicators I always use, only now I am using them on hourly charts.
For example, for the longest time I observed how the futures markets led the ETFs (exchange-traded funds). When the S&P futures and Nasdaq futures would get overbought or oversold, the Spyders and the QQQQ would then move in the opposite direction. However, over the last few weeks the futures have been so volatile it was hard to know when to pull the trigger on a trade. And it now appears that the relationship has reversed a little, and the ETFs are leading the futures.
It can be frustrating. But the market is not going to change for you, so you had better change to cope with the market you are in. You don’t have to change your ideologies, you just can’t be rigid in your approach to making trades and making money.