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Market volatility increasing Indicator Enthusiasm?
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Market volatility increasing Indicator Enthusiasm?

  #1 (permalink)
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Market volatility increasing Indicator Enthusiasm?

The last 2-3 weeks have seen very high volatility - VIX has shot up since towards the end of July. Intraday moves have been bigger than usual - the market has sometimes trended for 2 or 3 or 5 times its "normal" single-leg moves. All this has made short-term trading very profitable if you've gotten onto the right side of the market and had the patience to wait for big targets.

Along with these big moves there has been an associated spike in the interest that has been shown for new trading methods or new indicators (or even old indicators used in a new way). I feel like I'm seeing lots of enthusiasm being voiced for new trading systems and indicators as if the secret to the market has finally been laid bare. It seems that many feel that because of successful trading these last few weeks they've finally found the method/indicator/system that is the answer.

I don't want to be a downer but I would caution all those who have suddenly found a profitable system or have finally become profitable with their existing system to take a step back and consider that the markets over these last 3 weeks have been unlike any markets we've seen in the last couple years. If you've suddenly found a profitable system or approach, consider that it may have more to do with the spike in volatility than the discovery of a holy grail.

I'm curious to hear if others have noticed the "indicator enthusiasm" I'm talking about or its just me.

surly

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  #3 (permalink)
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Surly View Post
The last 2-3 weeks have seen very high volatility - VIX has shot up since towards the end of July. Intraday moves have been bigger than usual - the market has sometimes trended for 2 or 3 or 5 times its "normal" single-leg moves. All this has made short-term trading very profitable if you've gotten onto the right side of the market and had the patience to wait for big targets.

Along with these big moves there has been an associated spike in the interest that has been shown for new trading methods or new indicators (or even old indicators used in a new way). I feel like I'm seeing lots of enthusiasm being voiced for new trading systems and indicators as if the secret to the market has finally been laid bare. It seems that many feel that because of successful trading these last few weeks they've finally found the method/indicator/system that is the answer.

I don't want to be a downer but I would caution all those who have suddenly found a profitable system or have finally become profitable with their existing system to take a step back and consider that the markets over these last 3 weeks have been unlike any markets we've seen in the last couple years. If you've suddenly found a profitable system or approach, consider that it may have more to do with the spike in volatility than the discovery of a holy grail.

I'm curious to hear if others have noticed the "indicator enthusiasm" I'm talking about or its just me.

surly

Liquidity appears to be returning to normal levels, and consequently volatility will be returning to normal levels also. A traders confidence tends to fluctuate with his P&L, so it is no surprise that traders are becoming overconfident. But as we discussed earlier, markets are cyclical, and tend to be mean reverting. As soon as the market reverts back to it's norm of choppy directionless trade, traders will begin to sing the same old song.

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This thread is right on. The I am a genius and have conquered the market affect can kill you long term. If you were right a few times over the last few weeks and let your trades run you could have taken in some very large profits. But these last few weeks are not the norm. If you are calculating expectancy on a system may be better to consider throwing last few weeks out and look at your system. Enjoy those profits but try to stay objective about your results for longer term.

"The day I became a winning trader was the day it became boring. Daily losses no longer bother me and daily wins no longer excited me. Took years of pain and busting a few accounts before finally got my mind right. I survived the darkness within and now just chillax and let my black box do the work."
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liquidcci View Post
This thread is right on. The I am a genius and have conquered the market affect can kill you long term. If you were right a few times over the last few weeks and let your trades run you could have taken in some very large profits. But these last few weeks are not the norm. If you are calculating expectancy on a system may be better to consider throwing last few weeks out and look at your system. Enjoy those profits but try to stay objective about your results for longer term.

“In many ways, large profits are even more insidious than large losses in terms of emotional destabilization. I think it’s important not to be emotionally attached to large profits. I’ve certainly made some of my worst trades after long periods of winning. When you’re on a big winning streak, there’s a temptation to think that you’re doing something special, which will allow you to continue to propel yourself upward. You start to think that you can afford to make shoddy decisions. You can imagine what happens next. As a general rule, losses make you strong and profits make you weak.” – William Eckhardt

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“In many ways, large profits are even more insidious than large losses in terms of emotional destabilization. I think it’s important not to be emotionally attached to large profits. I’ve certainly made some of my worst trades after long periods of winning. When you’re on a big winning streak, there’s a temptation to think that you’re doing something special, which will allow you to continue to propel yourself upward. You start to think that you can afford to make shoddy decisions. You can imagine what happens next. As a general rule, losses make you strong and profits make you weak.” – William Eckhardt

So true tiger. My early success in trading back in late 90's early 2000's became my greatest enemy later. Back when you could jump on anything tech and make money I thought this stuff was so easy. But later gave everything back to the market and then some when markets changed.. Took me a long time to figure this stuff out and learned much through my losses.. But the process was needed so I could find humility in my trading. Market sure can teach alot of lessons.

"The day I became a winning trader was the day it became boring. Daily losses no longer bother me and daily wins no longer excited me. Took years of pain and busting a few accounts before finally got my mind right. I survived the darkness within and now just chillax and let my black box do the work."
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