Wednesday, 3 March 2010

Does Lower Volatility = Lower Earnings?

Today was another fairly quiet day. Volatility is a bit lower and I increased my usual size to fit the volatility to maintain my earnings. I look at how long it takes to form a range bar as a test of volatility. Other bar types can reveal this info by their ATR (average true range) but range bars need to be timed. Some packages have indicators floating around that do this. MarketDelta can be programmed to do the same but I haven't bothered as I have a sense of it.

Kiki is thinking how she will adjust to this lower volatility. If it only lasts for a short time it doesn't really matter. If it lasts longer, you will notice a drop in earnings if you keep the same size and are used to scaling out. Those who only want to take the first scale, all in and all out, will not notice except there may be fewer trades.

Trades for today:

 Click to enlarge


  1. Why no shorts at 1125 area? This was a huge area of confluence.

  2. Have you modified your Keltner Bands. The chart shown is different then the chart definition posted.

  3. Hello Tom,

    Would Tom have taken this trade?
    Having a little problems with pullbacks.


  4. Hi EL,

    I have a question on Trade 4. (Assuming arrows show the trigger bar and you enter at the close or near the close of that bar), I am confused at why you chose to enter on a trigger bar which showed negative VB (it was showing divergence, bar closing positive with negative VB). When compared this with bar at 15:18 (two bars earlier), it seems like it gave stronger signal with bar being green, VB is green and CVD is increasing, CCI's are similar on both bars.
    I appreciate your work and sharing of knowledge. Thanks.

  5. Tom,

    do you adapt your range bars, your targets and stops also to the lower vol? I guess you keep the risk per trade the same when you increase your contract size.


  6. Hi EL and Kiki. Question about 4th trade. There is negative VB at this bar. You still took the trade. Can you elaborate why?


  7. tomo,

    Here is my take on the 4th trade. It was taken near POC from the prior day. Three bars prior to the bar with arrow, VB showed that there are buyers at that price. The bar with the arrow is a weak retest to POC after buyer lifted offer in prior two bars.


  8. I'm no expert but from what i have gleaned from the blog and from Dalton I'll have ago at a couple of the comments/posts

    Here's my take on the 4th trade. CVD flat so it's not in the equation. 45 CCI favorable as above zero and has been for some time - long bias. CCI 6 has moved from below -100 to above which is a re-entry "flag" and Short term momentum has swung to long in line with longer term. Most importantly there is intra bar divergence - the bar shows sellers at the low yet the bar closes at it high with over all negative VB ion the bar. The sellers are trapped below the POC.

    For Anon above. My call on why no sales above 1125 is that first, unless a normal distribution day (narrow bracket) EL will only look for Outside In trades if price /entry is outside the Keltner. Second, EL's developing contextual view may have been to trade with the extension higher on dips on the day not sell the higher swings unless significant reason to do so.