Charting How Volatility has been Zapped from our Current Market (and what to do about it)

Aug 8, 2017: 10:32 AM CST

If you’re having trouble making the daily or weekly profits you’ve gained in the past, you’re not alone in this current low volatility market environment.

All things are temporary, and this too shall pass, so before the situation changes, let’s take a look at our extremely tight, compressed, low volatility stock market:

SP500 Stock market volatility declines

We’re seeing the S&P 500 Index with the % Change (daily) as the indicator.

A clear, consistent trend emerged:  We saw wide intraday swings (more volatility) going into 2016 that steadily declined as we hit the middle of 2017.

For example, it was common to see an intraday (single day) percentage movement greater than 1% (in either direction) at the left side of our chart.

Now, a one-day swing greater than 1% feels like seeing a Black Swan event!

In fact, in ALL of 2017, we’ve seen FOUR days trade more than 1%:  two up days and two down days.

That’s horrific if you’re an intraday or even swing trader who is used to a higher volatility environment.

As traders, we play the hand the market deals us and it often starts with the trend (non-stop bullish up) and volatility environment.

Until the market shuffles the deck and deals us all different cards, we have this ongoing low volatility bullish rising/creeping market.

  • How can we adapt?
  • Raise your timeframe (if you’re just an intraday trader, put on some swing trades)
  • Raise your position size (to make more money in a reduced volatility environment, trade more contracts or share sizes)
  • Play for larger targets (and also consider using wider stops to side-step the noise)

And above all BE PATIENT.  Don’t throw your promising trading career away in frustration.

This situation is temporary, like extremely high volatility environments are temporary.

Take this time to educate yourself on trading strategies, indicators, tactics, etc.

Build up your knowledge and confidence level now so you can effectively deploy those strategies when volatility returns… and it absolutely will.




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Corey Rosenbloom, CMT

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