During times of low market volatility, active traders often use a strategy that relies on intra-day volatility or a news catalyst that increases trading in a particular stock. However, this type of catalyst-driven strategy may not work during times of high market volatility. Here are some strategies that have worked for traders during periods of high market volatility. 1.Focus on ETFs. 2.Know whether an instrument is cap-weighted or equal-weighted. 3.If one index rises or falls, check the other indexes for a similar rise or fall. 4.Shrink your trade-time expectations. During times of high volatility, it may take as little as five minutes to see a change in price which would take all day during a time of low volatility.
- 2017 was a year for low volatile markets. During this period, traders are always searching for stocks with high intra-day volatility.
- In low volatile markets, traders will find it difficult to trade market ETFs like QQQ or SPY because they do not generate enough movement for profits.
- When trading goes from low volatility to high volatility, traders who are not well equipped either keep on fighting a losing battle or stop participating.
“Hunting for catalysts in individual names is counter-productive; the volatility you seek is operating within the whole market. Focus your efforts on the highly liquid ETFs that all the passive funds hold; SPY / QQQ / IWM / Sector ETFs.”