How to Trade Volatility

How to Trade Volatility [video_player type=”youtube” youtube_remove_logo=”Y” width=”560″ height=”315″ align=”center” margin_top=”0″ margin_bottom=”20″]aHR0cHM6Ly95b3V0dS5iZS9QaFFpOXdzY0h6Zw==[/video_player] Volatility was at an extreme this week with this markets dropping 7%. What should you expect next week? And, what should you be looking at? After 15 years in the brokerage industry I know that retail investors do the worst during periods of market volatility. In the midst of volatility everything may feel like you’re doing is wrong. Every trader on the street will be talking about selling the rally. Indices will drive stocks so focus on the indices. In this type of market you want to choose spreads. Any directional option, a call or put, can lose money even if you’re right. You never wanna be in a position where you’re right and still lose.

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How Long Can The Pain Last?

How Long Can The Pain Last? [video_player type=”youtube” youtube_remove_logo=”Y” width=”560″ height=”315″ align=”center” margin_top=”0″ margin_bottom=”20″]aHR0cHM6Ly95b3V0dS5iZS9rZGdWLWNzTnJGbw==[/video_player] Markets are getting ugly. Let’s take a look at the indexes on what to expect tomorrow. Unemployment numbers in the morning could drive a lot of the market action.

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Can You Handle the Volatility?

Can You Handle the Volatility? [video_player type=”youtube” youtube_remove_logo=”Y” width=”560″ height=”315″ align=”center” margin_top=”0″ margin_bottom=”20″]aHR0cHM6Ly95b3V0dS5iZS9QLWk3Y2dzbHVNYw==[/video_player] Volatility has been front and center to kick off 2016. Yes, 2016 has been good for Don. But, all experienced traders know the biggest move you’re gonna get is the short covering rally. I wouldn’t be surprised to the SPX back to 2000 by Friday. This is not the time to start buying puts. Wait for the “rip you face off” rally to the upside before establishing new short positions. Stay focused on the broader market. There’s going to be very few glimmers of light when the overall market is being slammed.

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Lower Highs and Lower Lows

Lower lows and lower highs [video_player type=”youtube” youtube_remove_logo=”Y” width=”560″ height=”315″ align=”center” margin_top=”0″ margin_bottom=”20″]aHR0cHM6Ly95b3V0dS5iZS84ZGd5MHRSR1YxWQ==[/video_player] Lower lows and lower highs in the markets. Tonight we take note of significant and minor support and resistance levels you should keep an eye on. The Nasdaq has a head and shoulder pattern developing. Lastly, let’s take a look at the Russell 2000 which is made up of small cap stocks. The technicals are starting to break down and it’s time to be very careful long.

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Volatility Inversion Watch

Volatility Inversion Watch [video_player type=”youtube” youtube_remove_logo=”Y” width=”560″ height=”315″ align=”center” margin_top=”0″ margin_bottom=”20″]aHR0cHM6Ly95b3V0dS5iZS9Xb2ppQzlsYXpvcw==[/video_player] The markets start the year with a bang. The FANG stocks that kept the markets a float in 2015 led the way lower today. I also want you to watch the financials very closely. The financials are the second largest market cap to the S&P. All the hallmark signs of volatility is there. What I also want to watch is volatility futures to see if there’s a volatility inversion. A volatility inversion is when the front month volatility futures are higher than the back month volatility futures. Right now the volatility skew is flat.

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Market Divergence Lead to Volatility?

Market Divergences Lead to Volatility? [video_player type=”youtube” youtube_remove_logo=”Y” width=”560″ height=”315″ align=”center” margin_top=”0″ margin_bottom=”20″]aHR0cHM6Ly95b3V0dS5iZS9SQXZDSzdGYkdxNA==[/video_player] The markets ended 2015 essentially flat. Will we see more volatility in 2016? That’s what I will discuss in this video. The story is market divergences. We will use comparison chart to compare all these indexes and analyze the divergences in the market. Large divergences have always ended in wild bouts of volatility.

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How to Execute Trades

How to Execute Trades [video_player type=”youtube” youtube_remove_logo=”Y” width=”560″ height=”315″ align=”center” margin_top=”0″ margin_bottom=”20″]aHR0cHM6Ly95b3V0dS5iZS9KZEcwdGxCX1Rrdw==[/video_player] How to execute trades and save money on your fills. This video will give you some tips on how to enter and exit an order. Retail traders have preferential treatment when it comes to orders. So play with the orders and see what you can get as your best fill. If this knowledge saves you one penny on the entry and one penny on exit that could pay for your commissions.

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Bargain Hunting for Stocks

Bargain Hunting for Stocks [video_player type=”youtube” youtube_remove_logo=”Y” width=”560″ height=”315″ align=”center” margin_top=”0″ margin_bottom=”20″]aHR0cHM6Ly95b3V0dS5iZS95amplaW10MzQ1UQ==[/video_player] Found a beating up stock you wanna buy? Don’t catch a falling knife. Here some different ideas about what you can do to bottom fish stocks.

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Trade Liquid Markets

Trade Liquid Markets [video_player type=”youtube” youtube_remove_logo=”Y” width=”560″ height=”315″ align=”center” margin_top=”0″ margin_bottom=”20″]aHR0cHM6Ly95b3V0dS5iZS84cFF6cHAzWTBoYw==[/video_player] Mathematically speaking it is impossible to make money in a market with wide bid and ask prices. If there is a low liquid product and the bid and ask is wide you’re losing as soon as you enter the trade. Don’t pay to play. You wanna be the house.

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Contrarian Scan in thinkorswim

Contrarian thinkorswim Scan [video_player type=”youtube” youtube_remove_logo=”Y” width=”560″ height=”315″ align=”center” margin_top=”0″ margin_bottom=”20″]aHR0cHM6Ly95b3V0dS5iZS8tdnIxanlLNWFYcw==[/video_player] First let’s talk about what to expect in the final trading week of 2015. Typically at this time of the year there is a mix of tax loss selling and window dressing. Tax loss selling is when investors sell their beaten down stocks for the year in order to take their tax loss for 2015. Window dressing at the end of year happens when stocks that have done well over the year are bought so they appear on year end statements. Next let’s talk about scans. Why look at charts all day long when all you need to do is scan for whatever you’re looking for? Doesn’t matter if you’re looking for a particular MACD cross over or a stochastic level. Make your life easier with scanning. In tonight’s example I’ve built a contrarian scan. For the shared scan

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Don Kaufman Don Kaufman

TheoTrade co-founder, former CBOE market maker and thinkorswim Chief Derivatives Instructor.

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