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Hi palsanand,
Monday, November 17, 2003, 11:53:41 AM, you wrote:
p> I just got stopped out of my AUDJPY position at a break-even
p> price. Better to wait for a stronger signal and listen to
p> volatility as it might have increased from last week.
Well, there is no question here that volatility has increased. When
you have a stock trading around 800, and a base ATR range that gets
established for that price area, and then just a couple three weeks
later the stock is trading smack on 500, with an ATR value the same
as it was when the stock was significantly higher, you have
significantly increased volatility.
Volatility is great, but playing with it beyond a certain range is
just gambling, IMO. I prefer playing increasing volatility as it just
begins to come out of a low-volatility period. Once it really picks
up steam I stand clear again and wait for the cycle to play itself
over again. Risk control becomes very difficult the greater the
volatility. Stops have to be set with a nod to volatility, and that
means position size has to be decreased, or else one smack upside the
head will undo a string of nice plays, just like that. I like larger
position size with volatility that I can embrace, rather than
volatility I need to be really wary of.
That's probably why I stand aside a lot. There is no *need* for me to
do anything today (as there is no *need* for me to do anything on
most days), and unless I get a solid signal this afternoon on one of
my short term plays, I won't do anything. My short term system has
already turned itself completely off for tomorrow because of the
volatility explosion today. I already know that I will have no
setups tomorrow, and I may go to the mountains -- it's coming into
peak fall color season this week in the Kanto region, and the weather
today and tomorrow is to die for.
Best,
Yuki
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