{"id":8748,"date":"2010-12-08T13:09:25","date_gmt":"2010-12-08T18:09:25","guid":{"rendered":"http:\/\/www.smbtraining.com\/blog\/?p=8748"},"modified":"2010-12-08T13:40:12","modified_gmt":"2010-12-08T18:40:12","slug":"in-a-market-of-volatility-hidden","status":"publish","type":"post","link":"https:\/\/www.smbtraining.com\/blog\/in-a-market-of-volatility-hidden","title":{"rendered":"In a Market of Volatility Hidden"},"content":{"rendered":"<p>Yesterday I was a panelist at <a href=\"http:\/\/www.terrapinn.com\/2010\/hftusa\/the-big-idea.stm\">High Frequency Trading World USA 2010<\/a> in NYC\u00a0where we discussed HFTs effect on market\u00a0volatility. \u00a0Some are concerned that a market overly\u00a0volatile\u00a0will scare investors from participating in the market. \u00a0Since HFTs are our modern middle men, perhaps market maker rules should be considered for them. \u00a0This is an idea worth exploring but will not change the real\u00a0volatility\u00a0from today&#8217;s market. \u00a0And since we trade in this potentially\u00a0volatile\u00a0market, how do we protect ourselves as traders?<\/p>\n<p>We must ask what is the context of today&#8217;s market to understand our real\u00a0volatility. \u00a0Most just look at the VIX and use that as the indicator to measure volatility. \u00a0As a trader of a dozen years I can share that looking at indicators and charts-a-trending works until they don&#8217;t. \u00a0And a whole lot of market context and\u00a0psychology must be mastered to understand the real potential of a stock&#8217;s or market&#8217;s risk.\u00a0\u00a0 Sure that VIX indicator from today works for today- as long as nothing surprising hits. \u00a0But when is that ever the case? \u00a0And in our time, potential\u00a0land mines\u00a0cannot be undervalued.<\/p>\n<p>So what is the context of this market? \u00a0We sit in an\u00a0under-participated\u00a0market. \u00a0 Federal and State taxes have a future of increases. \u00a0Unemployment is too high without a signal of hope. \u00a0There is the housing crisis not yet over. \u00a0Banks are not lending to small businesses. \u00a0Consumers reek of too much debt. \u00a0Our businesses are increasingly global. \u00a0European governments are a news reel away from causing investor worry. \u00a0Asia and the Middle East can&#8217;t help themselves but provide bursts of instability. Information is transmitted to more at the stroke of a tweet. \u00a0Orders can be flooded into the markets by more for more size and speed with buyable algorithmic\u00a0programs. \u00a0Traditional market makers were replaced by HFT market makers who have little obligation to make a market when bad news hits. \u00a0We are averaging 1.75 flash crashed in stocks a day according to a report from Zero Hedge and Nanex. \u00a0From the trading desk we see too many 80c spikes in one penny spreads. \u00a0Check out some intraday charts of the high volume, supposedly liquid LVS as Exhibit A. The market has climbed 60 percent in less than two years. \u00a0In short this is a market of potential volatility hidden.<\/p>\n<p>Maybe we need to get used to a more\u00a0volatile\u00a0market until we straighten out the fundamentals of our economy and world politics. \u00a0We certainly as investors and traders need to weigh the above in all our trades no matter how pretty our\u00a0up-trending\u00a0charts appear. \u00a0Not that we need to lighten up or get flat these positions, we just need to understand the risk. \u00a0I am not calling a market top here, just asking you to consider the context of this market. \u00a0As a trader, it&#8217;s the time to sit at your trading station, ears to your news feeds, eyes on your news services, with hedges, responsible stops and Plan B&#8217;s in place. \u00a0Because there is risk that what you are seeing on your screens presently is not your real risk.<\/p>\n<p>Mike Bellafiore<\/p>\n<p>Author, <a href=\"http:\/\/www.amazon.com\/One-Good-Trade-Competitive-Proprietary\/dp\/0470529407\/ref=pd_sim_b_2\">One Good Trade<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Yesterday I was a panelist at High Frequency Trading World USA 2010 in NYC\u00a0where we discussed HFTs effect on market\u00a0volatility. \u00a0Some are concerned that a market overly\u00a0volatile\u00a0will scare investors from participating in the market. \u00a0Since HFTs are our modern middle men, perhaps market maker rules should be considered for them. \u00a0This is an idea worth exploring but will not change &#8230; <a href=\"https:\/\/www.smbtraining.com\/blog\/in-a-market-of-volatility-hidden\" class=\"more-link\">Read More<\/a><\/p>\n","protected":false},"author":144,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[10],"tags":[4674,18,1193,653,1510,1509],"class_list":["post-8748","post","type-post","status-publish","format-standard","hentry","category-mike-bellafiore-bellas-blogs","tag-one-good-trade","tag-smb-capital","tag-trader-education","tag-trader-training","tag-vix","tag-volitlity","no-post-thumbnail"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v26.1.1 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>In a Market of Volatility Hidden | SMB Training<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.smbtraining.com\/blog\/in-a-market-of-volatility-hidden\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"In a Market of Volatility Hidden | SMB Training\" \/>\n<meta property=\"og:description\" content=\"Yesterday I was a panelist at High Frequency Trading World USA 2010 in NYC\u00a0where we discussed HFTs effect on market\u00a0volatility. \u00a0Some are concerned that a market overly\u00a0volatile\u00a0will scare investors from participating in the market. \u00a0Since HFTs are our modern middle men, perhaps market maker rules should be considered for them. \u00a0This is an idea worth exploring but will not change ... 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