📈 Volatility is Increasing

Adapt your trading strategy accordingly.

The Skew is Changing

The first thing to understand is what you are looking at with the chart below:

We are entering a period of quantitative easing, which is denoted by the green box. When this happens, yield drops so investors are incentivized to buy equities and increase their level of risk.

When investors increase their level of risk, they buy puts to protect their positions. This increases the amount of volatility in the market, signified by the y-axis.

So you need to understand that the way you traded for the past four years may not work anymore and you will need to be cognizant of growing volatility.

Whether that means you widen your stops, utilize trailing stops, only day trade, or do something else is up to you. But being equipped with this information will give you an edge.

Volatility Increasing

The lack of volatility that we have seen in the market recently is signified by the chart below:

We are at the greatest amount of trading sessions without a sell-off of greater than 2.05% in over a decade.

This is likely going to come to an end based on the skew changing - so be wary.

I walk through my trading strategy to address the growing volatility here: