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How a Pro Trades Around Volatility

07/05/2011 8:30 am EST


Adrian Manz

Co-Founder and Daily Contributor,

When volatility is changing quickly, professional traders make small adjustments to how they trade, and Adrian Manz explains how he has adapted his strategy and time frames in order to stay on the proper side of the markets this summer.

I’m speaking with Adrian Manz. Adrian, great to see you. Well, summers are supposed to be quiet, low volume, low volatility, and it’s not turning out like this. What’s changed with the markets?

Well, there’s an awful lot of reaction to geopolitical events, there’s an awful lot of focus on what’s happening overseas. What it’s leading to, at least in our trading, is a total focus on the volatility-based patterns, and then also a shift in time frames to capitalize on that volatility as much as we can wherever it occurs. 

Is that a change in your strategy?

It’s somewhat of a change. We use to focus exclusively on the intraday time frame. We also were very, very tightly focused around the fact that markets are very cyclical and that we can always find the next phase of the cycle.

The volatility patterns that we trade tend to be the ones that generate the largest returns, so what we’re doing now is just saying we’re still going to do the cyclical trading in our intraday work, but when the opportunity arises, when we can find opportunity in the daily time frame, the weekly time frame, or even the monthly time frame, we bump out and start looking at charts to see where the opportunity exists and how we can capitalize on it.

Some of the positions that we put on last for weeks or months, instead of just lasting a couple of days or even a couple of hours.

Is it a function of this downtrending market?

Yeah, I mean, my work does very, very well at picking market reversals, so we’ve been waiting for a market that’s downtrending for a while, if you will. 

It’s ultimately that we’ll be there when the cycle reverses again as well, but we’ve been almost 100% short for the past two months and anticipate being short for the foreseeable future, probably into the end of summer.

What advice are you giving to your clients?

Just don’t sweat the volatility. It’s part of the natural market cycle, and as long as…we do get clients who call every day and want to know how their money is doing, or is this really a time that they should be in the market. 

We say trading is a very different approach to the market than investing is, and in our case, it’s a full-time job.  It’s not “Set it and forget it,” or just put your money aside and see what happens in a couple of years. 

We’re actively managing every dollar that we have every minute of the day, so the outcomes are going to be good—knock on wood—and they’re going to keep being good going forward as long as this volatility is in place.

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