Strategy Lab: Make Wild Market Moves Your Friends

January 9, 2009 7:05 am

2009 is here! Now what?

Though volatility has dropped from the peak in November, the daily ups and downs have still often been much bigger than normal. Assuming that there ever was actually a “normal.”

And the final hour of many trading days have shown remarkable swings that have been responsible for most of each day’s move. It seems as if the market is similar to a basketball game: Who needs to watch the whole game when it is decided in the final minutes?

This market action scares away many investors who may not have time to watch the daily ups and downs. But it can be a good opportunity if you find the right strategy. Whether you find a great stock or one that is simply flying from top to bottom on a daily basis, you need a way to manage the risk and form a plan for profit.

So, as previously promised, here’s a journal entry that outlines a trading strategy for times of unusual volatility, based on our trading at Horowitz and Co. It lets you trade small moves on volatile stocks.

Read the entire journal eny and download an interactive trading spreadheet HERE

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