Home > Lessons from the trading floor > Trading the week of the Bailout!

Trading the week of the Bailout!

September 23, 2008 Leave a comment Go to comments

A couple of weeks ago I was writing about how glad I was to leave the dull days of summer behind. Well I can say I have not been disappointed. The volume and the volatility we have had in the last two weeks has been Unbelievable. Each Friday I tell our traders to get some rest and read the news to prepare themselves for yet another week of finding opportunities for us intra-day traders.


This week we have been looking at the following:

1-     The debate in Congress about the $700bn bailout package.

a.       What will congress add to the package?

b.      How long will they take to pass the package?

c.       Be ready for a no go on the package. You just never know.

2-     Any new stocks on the no Short list.

a.       Every day they have added 2-3 stocks.

b.      When will the measure end? Oct 2nd, I doubt it.

3-     Price of Oil

a.       It would be nice to see some stability.

4-     Financials stocks. Any pressure here results in the need to raise more capital.

a.       In particular: GS MS WM WB

5-     Volatility

a.       Are we seeing a trend for lower volatility readings in the VIX index?

b.      Has been as high as above 40, needs to move lower than 30.


Any one of these events will change the direction of the market on a dime. Everybody needs to be aware of these factors, and not get married to a position; this is a fast moving market – be prepared to take advantage.


Due to the high VIX index we have seen large swings in the markets. Of our traders that are fast with executions, we have seen them making money scalping all day long. Our traders that are looking to hold a position for a longer period we have recommended adjusting share size so that they can accommodate a larger stop loss price. In today’s markets a 5min bar could be as large as $1, and in context to the movement in the last days it really isn’t that much, but it is enough to shake some traders out of their positions. The lesson that traders are learning is the need to let a position breath more is resulting in the trader taking a smaller position. Other wise you find yourself trading in the right direction, with the trend, but not making any money because you get stopped out too early.



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