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Strategies & Market Trends : Systems, Strategies and Resources for Trading Futures
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To: Chip McVickar who wrote (18333)3/11/1999 6:58:00 PM
From: Teresa Lo  Read Replies (1) of 44573
 
This was a big debate amongst the old grey hairs at my old brokerage firm. They swear that CNBC has compressed everything and that none of the old techniques work anymore.

I do not believe it. My personal feeling is that while volatility has definitely increased over the past 10 years, the effect has also been exaggerated by the fact that prices are so high. For example, if there was a 30% volatility in the Dow when it was 1000, then you'd think that it could swing 300 points on any given day. On a Dow with a volatility of 15% at 10000, that's 1500 points. And of course, since volatility is more like 30% now and 15% back then, the point swings get so great that it appears to speed up the market more than it really is.

The solution I use? In higher volatility markets, one must cut down on the size of the position. Second, in order to apply reasonable money management in terms of dollars at risk, I moved in by an order of magnitude in terms of time frame. In the old days, I could position trade off a daily chart but now I must trade off the 5 minute chart to have the same kind of risk. The good news is that it makes the same amount of dollars and one gets the added bonus of not having to carry positions overnight.

As for patterns, they are still all the same...at least to me.
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