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What to Do When Markets Slow Down

Jun 10, 2021

By: Frank Kaberna

There’s a tale that circulates among traders every year around this time to help “explain” lulls in market activity. It interprets any slowness in stocks and commodities as market participants in the northern hemisphere going on summer vacation. 

While the S&P 500 Volatility Index did drop below 16 last week for just the third time in the last year,* active traders shouldn’t necessarily close their platforms for the next three months; however, an adjustment could be made in order to help your day trading acclimate to leaner moves during beach body season.

 

Adjusting to Smaller Moves

In the last year, the daily range in Small Metals futures has moved from above +/-1.25 to below +/-0.80. This may not seem like a huge deal, but reducing the amount of unique price levels by 35% can put a real damper on day trading opportunities. The remedy for many consists of simply adapting order entries to smaller ranges. Though it may feel awkward at first, trading SPRE® when it’s up or down 75 cents can yield more chances than waiting for a dollar or more.

 

Small Metals \ SPRE

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Source: dxFeed Index Services (https://indexit.dxfeed.com)

Tighter Entries and Smaller Size

With lower volatility and more aggressive entries, traders often carry fewer units. For example, instead of selling three futures into a +1.20 rally, scalpers can offer one contract into a +0.70 rise. By this strategy, active traders are both keeping their number of opportunities high while not overextending in case of an outlier day.

Getting in earlier doesn’t have to correlate to worse prices thanks to strategies like scaling. In fact, you can have three short futures at the +1.20 mark by selling one at +0.70, +1.20, and +1.70, and this way you still get in on something even if the market never reaches +1.20.

Screen Shot 2021-06-10 at 8.53.39 AM.png

You don’t have to shut down your trading operations just because some market participants have sidelined their platforms in favor of the Greek Islands, but you can adapt to changing environments.

 

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Save Every Time You Trade the Smalls

The Small Exchange has also created a limited number of subscriptions for a one-time payment of $100 that give traders a lifetime of reduced exchange and market data fees when trading the Smalls.

For more information on the Small Exchange’s products and subscription service, visit smallexchange.com. And be sure to check out my new show on tastytrade, Small Stakes, where Pete Mulmat and I will show viewers how to navigate Small Exchange products every Monday-Friday and always on demand.

If you’d like to find out where to trade the Smalls products check out the list of brokers that offer their products, or tastytrade’s preferred broker tastyworks


*Values taken from CBOE as of 6/2/21

© 2021 Small Exchange, Inc. All rights reserved. Small Exchange, Inc. is a Designated Contract Market registered with the U.S. Commodity Futures Trading Commission. The information in this advertisement is current as of the date noted, is for informational purposes only, and does not contend to address the financial objectives, situation, or specific needs of any individual investor. Trading futures involves the risk of loss, including the possibility of loss greater than your initial investment.


Options involve risk and are not suitable for all investors. Please read Characteristics and Risks of Standardized Options before deciding to invest in options.

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