Those that read DevDosh Ltd content on a regular basis will be familiar with the recent blog CBOE-VIX says jump. In this blog we highlighted that the volatility being introduced to the market as indicated by the rise in the Chicago Board Options Exchange volatility index is a strong signal to day traders that it is time to roll up their sleeves and get busy.
The VIX started its upward ascent from its 21 day moving average on the 20/02/2020. It left it’s approximate historical average of 15 and started a trajectory that has taken it all the way to 54.46 as of close of play on the 09/03/2020.
DevDosh Ltd weighed in on the 26/02/2020 when the VIX was at 27.85 to tell any traders that hadn’t already liquidated positions to free up capital to day trade that now was the time. But what was to come after that and in the days to come?
Generally with swings in volatility this large sectors and stock become correlated. Everything goes up and everything goes down simultaneously. Even the quality and value for money stocks are caught up in mass movements and thoughtless trading activity.
Quality stocks which are resistant to the factors that started the volatility will then emerge in a “new world order” kind of way. Stocks which were deemed value investment or as being from companies that had the winning formula to stellar growth may not be as attractive in the newly shaped landscape. This is the phase that your long short strategies will come back into play.
In the mean time, trade like an animal while remembering the following;
- Use tighter stop losses/automatic sell orders
- Set smaller targets. Get in/get out
- Be flexible
- Stick to your strategy and trade without emotion
- Higher volatility means you can earn the same value of return with less capital exposure
Of course if you would rather have a fantastic return without constantly researching sectors and companies or monitoring markets visit DevDosh Ltd to fins out about the safest 10% fixed income product in today’s market. You’ll be pleased that you did.