Friday, January 16, 2015

Warning, Warning: Volatility is back!

The volatility is back baby!

The crazy volatility that we've been seeing in crude (+$7 then -$5 in a day... wth?) is spreading to the other markets.

The Swiss led the charge with equity volatility and I think people are starting to wake up now.

Yesterday we also saw FX algos go wild. Condolences to anyone trading the CHF pair.

The S&P500 is below its 100DMA which is a big deal for technical traders and trend followers. The S&P500 also lost its 2000 level, which I think is pretty significant.

Volatility is back in the market, and that means opportunity (to me). Honestly, the sell-off in Oil and the EURUSD are probably a trend-followers wet dream. However, I really don't have it in me to trend follow. I'm just not comfortable conforming. How can everyone be right all the time and make money? That just doesn't make sense to me, which is why I can't do it comfortably. I am much better buying and selling at (relative) extremes and making money with the use of volatility. Even sitting in huge unrealized losses isn't a big deal for me because I am fully aware of the game that I am playing.

I was massively short the US indices, but with the overnight plunge I decided to lock is some profits. This is pretty similar to the pre-Christmas mini "crash" strategy that I used. Basically, I'm recycling my capital because I do think that we are going to see bounces soon, would will provide me an even better entry to be short again.

So recently, I've been learning from some wise Twitter guys (mostly regular Joe's like you and me) and I like the concept of scaling in and scaling out of positions. Why do you have to be either 100% in or 100% out? 

Also with CMC (my CFD broker) introducing simultaneous long/short positions for the same product (no netting) at the end of the month, that allows me to express and trade my long term position, but also hedge and take advantage of short term counter trend positions. This is extremely good for people like me that only trade a few products. It gives me more options!

2015 is shaping up to be an interesting year. Who knows what will happen in the future? But one thing is for sure, with liquidity at rock bottom levels, when volume comes back, we gonna see a shit ton of volatility.

The Swiss giving up their currency peg directly says that. Many people think that they've folded and have lost the battle. I think that they are finally being pragmatic and will win the war.

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