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I posted a similar question in my journal, but I wanted to get the input from a wider audience.
A bit of background I'm a rookie trader, and I started fully live trading ~August (I took some trades starting May, but wasn't consistently trading until August). So this is the first time I've experienced this level of volatility in the markets.
Last Wednesday and Thursday were super volatile, sure, but they were mostly directional when it came to their volatility. What I mean by that is that they didn't chop around so much before moving where they wanted to go, their moves were just very aggressive.
Today and Friday have shown strong signs as to where market's going, but there is a lot of choppy volatility en-route to the destination. Surviving a trade long enough for it to become a winner seems harder to adapt to, than other market conditions.
The conundrum of a rookie trader learning in this environment
As a trader who prioritizes long-term growth as his current goal (improving as a trader) over short-term profits ($). What is the right course to take here to learn as best as possible, psychologically?
Right now the conundrum I'm faced with is as follows:
Do I limit flexibility in my trading style (max X trades per day) and slowly learn until the market conditions become more favorable for my trading style?
or do I allow flexibility and protect my account with a max % loss / day so that I can learn how to trade in this environment as fast as possible?
Somewhere in between?
Some questions that are running through my head debating what the right answer should be:
Should discipline be prioritized and a restriction for # of trades or # of trades per hour be set and followed? Will this mean that a trader won't be able to adapt quickly to these conditions? Is it ok to consciously take the 'slow learning' approach?
Should a trader take as many trades within their % loss limit until they can get the 'flow' of things? Is the risk of over trading not worth the potential of learning fast?
Will taking too many trades lead to bad habits in the mid and long-term that will be too difficult to overcome?
At what point should a trader say 'this is not where I can adapt fast enough, I will wait until I'm a better trader?'
I was able to learn from my mistakes on election night, and adapted very successfully to the directional volatility we saw on Wednesday and Thursday last week. Truthfully though, I overtraded on election night and thus had a lot of points to refer to and analyze for proper learnings.
But with Friday and today, I feel like I haven't quite figured out how to adjust my trading style to fit the market. In a way that leaves me comfortable psychologically. I could triple my risks and today I would've done very well, but I don't know if that will lead me down the right path in the long-term or not. That sounds like a simple solution and it could just be a band-aid fix on a potentially problematic wound.
Also, on election night I was lucky that I ended positive, but I don't know if I should try the same approach of taking most trades that are giving me the signs I'm looking for, and then seeing which ones worked and which ones didn't.
I hope that makes sense.
Yesterday's excellence is today's standard and tomorrow's mediocrity
I think that if I want to be a successful trader long-term, I will need to adapt to every major trading condition.
This means low range days, trend days, extremely volatile and directional days, news days, and days like today and Friday, and others I've yet to experience.
One of my goals is to be a good enough trader that I can adapt to any market by utilizing the right methodology.
I do think that is a priority for me, although I might be overestimating my psychological improvements and maybe I need to focus more on that first. I don't know.
My thinking is that I'm going to have to adapt to this sooner or later, so why not sooner when I'm risking a small amount $-wise as 0.5% now will be much smaller than 0.5% 2 years from now?
In my opinion high volatile environments like last week are where the market gives you the most potential to succeed big.
If you can learn to trade well under high volatile environments, you can grow your account very fast during these conditions. I grew my account last week more than I had done my entire trading career and I would be lying to you if I said that wasn't appealing.
My goals and thinking could be messed up, so if anybody thinks so feel free to say that. I've been wrong many times throughout my trading career and it wouldn't hurt me at all if I'm wrong this time as well
Yesterday's excellence is today's standard and tomorrow's mediocrity
I have a surfer friend who likes to surf typhoons. He goes out there and surfs in the nastiest weather, meanwhile the police are threatening him from the shore with a megaphone. He also loves to go blasting down 11th Avenue in the middle of the night at 150 mph on a sportbike. I think it's kinda crazy.
I do not think events like the election are tradable. Fun to watch but...
You end up with a big story to tell but a small house. Like my surfer friend.
The way the pro volatlity traders do these binary events on the long side is to be set up well in advance with a table stakes volatility play such as a VIX 1x2 put on when VIX is under 15.
The stats show that 95% of these VIX spikes do not last longer than 3 days, so it usually becomes clear where you can play them to the downside. Fantastic vol crush trades. Provided, you do not play vol crush when the term structure is in backwardation. You wait until there is no backwardation.
The answer to questions about volatility is always the VX futures term structure. You need to be monitoring it closely if you want to understand volatility.
Volatility is just volatility, it provides more risk and more reward for the amount of time in the market, I would rather be practiced and fluent in trades that occur more often so I can trade those in bigger size than trying to master more rare events.
