When was the last time volatility was this high or market action this crazy for three months September October November 2008 these past months were not normal market action. and don't expect to be like this forever. any market veterans care to comment on this volatility
I dont' know where market volitility is going, but trying to predict it is like trying to predict when the next comet will hit the markets. It's like perpetually staying short waiting for armageddon to hit. Chances are you'll close out right before it hits. If you're wondering if we'll get 1000 point range days again, my guess is yes but being in a position waiting for it to happen is, again, futile. Look at past 5 days. So what if it's low volume, small moves???--there is still price action. Dow moved 500 points in 5 days. Gauging market direction based on price and to an extent--sentiment is a much better indicattor to trade on. What do I mean by sentiment? Global markets tell a story eveyday. I live in the USA but have been overseas for 4 months. TIme difference is 12 hours. When I turn on bloomberg, I mostly see European markets and Asian markets trade. Everynow and then I see SP futures. how futures react tells a story. Ever wonder why futures are down or up so much in morning. It's like a song and ever player plays a certain part. All parts will end up in harmony. You have to be able to "hear" the song. It's how you know or "feel" when a short is not working. Or when you can just buy blindly for days and shit keeps going up for no tangible reason. THis is how I trade, and find that it's the most consistent way of keeping my ass out of trouble.
Point is, you can't just rely on a single number (vix) to tell you if markets will tank or rally. you got to figure out the "song"
Very interesting... I wish I could do that. I can know I'm right (like being short XOM 83.37 x 4500sh and holding overnight... 1000) then take a point profit when futures fair value means I should hold and wait... must learn to sit down relax and let the money flow in Lots to learn in this game. Seems like you have it simplified. Having been around the block really pays off. Man, I sound like MandelbrotSet. But thanks for sharing wisdom with ET.
Most of the time when i enter a trade, i don't think about how much money i can make. 90% of time i dont' even see PnL. i enter based on my criteria, but after getting into position, I look for signs to get out. Until those signs start showing up, I stay in the trade. For instance, went short financials on monday, cause Friday felt "wierd." Turn on TV and all you hear is Santa Claus rally. market surged for about an hour and a half, then went down all day. markets been up for like 2 or 3weeks now. So I throw out a short. Works on Monday, Tuesday. But moves are small. But price action in fas and faz tell me financials are still weak. Still holding. Looking to exit Wed. Judging from overseas market, I anticipate slightly same game. tank right at open, then squeeze. Closing half at first tank. now if rest of day doesn't proceed as i think, i'll close whole position and look to reneter next week. Honestly i think when talking heads start talking bout sp 500 breaking new lows on tv is when i'll sell. (sell before and look to enter long). Why can i make these seemingly acute accusations of what market might do? cause this is what the song has been. Cept on the long side. Last few weeks showed characteristics of bull market, so trade it like bull market (buy dips). but have to remember, this is a bear market overall and shit will continue to go down, maybe not make new lows, but market will favor shorts more than longs over time. There's no specific sign to tell me what to do, but every sign. Price action, talking heads, fakeouts...it all tells a story.
The VIX has been dropping steadily. Yesterday market was up less a percent but the VIX dropped almost two! I guess after the New Year is when we'll see what's really happening.
Volatility is all a matter of perspective. If it's too low in the time-frame you normally trade, go lower. I assure you that the one-second chart is still plenty exciting.
The drop in the volatility indices, Vix, vxo, vxn, is a direct result of the easing in the credit markets. There has been a massive improvement in credit market indicators in the past month.