Its funny to read so many posts about how "poor" the day trading environment has become. In my opinion it has never been better. It is unlikely that we will see a year as volatile as 2002. Daily ranges on the SP500 have been over 15 points for the past 6 months and the VIX over 30. However, I'm hoping that much of the volatility will continue. The hedge funds have taken over and they make the markets crazy. The market of the 90's was dictated by the index funds and other large funds getting the 401k money. I think hedge funds are the new "marginal" buyer and seller of stocks. They are now setting the prices. I believe the hedge funds are a big part of my day trading success. Has anyone noticed more this year than in the past, that the market has become like a light switch, either "on" or "off". It has become very predictable at times. Nobody buys unless the market is going up, nobody sells unless it is going down. The bull/bear mkt cycle has been reduced to 2 months. The winning game plan has definitely been to go with the flow and let the reversal beat you. Investors are so gunshy right now that they will not buy weakness. So the weak stocks get weaker, strong get stronger. The current market environment has rewarded my system of buying strength, selling weakness. There is little reward in this market for bottom fishing or top fading. I think this is because the hedge funds are all trend followers and buy with reckless abandon until the trend reverses. I beileve that the hedge fund time horizon is a period of days or a few weeks. So as long as i'm daytrading and sticking to the trend, i will not be whipsawed often. Because the hedge fund trend followers stick to the trend for several days. All my worst trading days in 2002 were from bottom picking or shorting strength. I can only think of a few days where i got hurt by a reversal (after the 10:15 whipsaw period) and none of those instances were that bad. As long as the VIX is above 30, daytrading will be good, IMO.
I think there is many studies that suggest volatility is cyclical... which might mean the volatility is likely to tame down a bit next year..
Its an amateur question, but how do you figure out what the vix is? Is there a special formula? I have esignal and qcharts, is there a way of figuring it out there?
very well for the "Turtles" in the 80's in commodities <The current market environment has rewarded my system of buying strength, selling weakness. >
According to the VIX, we had a higher ave of volitility this year then during the boom of the dot-com era.
I'll bet 2003 will have a 10 point average range in the S&P and 20 in the Nasdaq, requiring tweaking of methodologies to make money. While the rewards may subside, so will the risks, so it will be a matter of adjusting your bets, and cranking it up a bit.
VIX is an "index" just like the DOW is and index or the COMP is an index. All "reasonable" data vendors support it. On my vendor, the symbol is $VIX.X. nitro
This analysis is undoubtably 100% correct. As an ex-pair trader, I spent some time thinking about why my methods had gone "bad." Since "most" pair traders play convergence as opposed to divergence, I got creamed on days where the differential got out of line, played it to converge, only to see it go further out of whack and hit my "stop." What is funny is that even on the days where I played divergence on weak/strong stocks within the sector according to the pair method for entry, I faired better, but still not "par." This I have never been able to reconcile and I will need to reanalyse it... It is somewhat hilarious now that I am trading directionally within my timeframe of "comfort" that my trading has taken off again. LMAO nitro