Home > Lessons from the trading floor > Low Volatility$

Low Volatility$


The market has been in a fairly sideways pattern, with a choppy trade. This should not be surprising to most traders as the end of summer doldrums were in place and some just returning from their vacation. While many understand that volume is light towards the end of the summer, many do not take that into consideration while making their trades.

 Too often, we see traders’ trying to trade the same way every moment of every day. In trading, all days are not treated equal and in order to be consistently profitable you must observe strict rules while trading in low volume, low volatitility environments.

If you look at this weekly chart of the $VIX, you will notice low volatility and lack of true direction over the last 5-6 weeks. It is during these times, that stock selection becomes even more important. You should be scanning for stocks that are in play that have a good intra-day range ($2-$3 minimum). That being said, the stocks must not be too volatile for your experience level.

Trade stocks that you can manage your downside and that will not get you stopped out for the day in one trade. The $VIX traded above the trend line for a short period last week and has since traded below. Pay attention to the $VIX closely to determine if it will break the downtrendline and also to see if the volatility picks up as we get deeper into the month of September.

  1. September 9, 2009 at 5:55 pm

    Great post …I remember when the $VIX was above 50 and the avg daily range in the SPY was $5-6, now the avg range is $1.50.

  2. September 9, 2009 at 8:50 pm

    Yes! Awesome post. These charts and insights from my mentors help me to see through some of my challenges and know what to look for next time.


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