Managing Editor’s Note: We’re in the midst of a historic AI boom, but our colleague Jeff Brown says, please do NOT BUY another AI stock before you hear what he has to say tomorrow, October 14, at 8 p.m. ET. He’s calling his strategy session The October Million-Dollar Cycle.
He’s going public with what could be one of the biggest discoveries of his career, and he’ll discuss his TOP FIVE AI plays for this cycle. He’ll also give away the name of an AI play that he believes could jump 1,000% or more, completely free of charge.
For traders, few things are more frustrating than a market going nowhere.
Prices drift within a narrow range, momentum peters out, and there’s little conviction from buyers or sellers. Even when a promising setup unfolds, the market fails to follow through.
So when volatility finally picks up, it’s only natural that traders start to get excited.
This week brings plenty of potential catalysts. Third-quarter earnings season kicks off with the big banks. We get the Consumer Price Index (CPI) on Wednesday and the Producer Price Index (PPI) on Thursday. Federal Reserve Chair Kevin Warsh speaks on Friday.
But while increased volatility can create more trading opportunities, there’s an important distinction traders need to understand. Just because a market is finally moving around doesn’t necessarily mean there’s a good trade.
Some of the most volatile trading sessions can be among the most challenging to trade. If you’re not careful, the very thing that pulls you into a trade could end up working against you…
Marc Chaikin says a new, volatile phase of the AI bull market is starting, and only 5% of stocks are built to survive it. On October 15, he'll reveal why the AI boom is in crisis – and the breakthrough that can help you potentially double your portfolio amid the uncertainty. Get the details here.
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What Jeff Brown has to say tomorrow, Wednesday, October 14 at 8 p.m. ET… During his new strategy session he’s calling The October Million-Dollar Cycle. Click here to automatically save your seat… Because Jeff is going public with what could be the biggest AI secret of his career.
One of the biggest dangers during a volatile market is the temptation to chase a move.
Imagine the S&P 500 suddenly surges following a better-than-expected inflation report. Within minutes, the index jumps sharply higher as buyers pile in.
A trader watching from the sidelines can feel like an opportunity is slipping away. So they jump on board, hoping to catch the next leg higher.
But just as quickly as the rally began, it runs out of steam. A wave of selling emerges, the index reverses, and suddenly that promising trade is underwater.
The problem isn’t simply that the trader got the direction wrong. They didn’t enter based on a strong technical setup. They acted impulsively because they desperately wanted to catch the tail end of the move.
That’s a low-probability way to trade. You should never enter a trade if the reward doesn’t justify the risk – that becomes even more crucial when volatility increases.
Because when markets are moving sharply in both directions, your position can move quickly against you. A loss that looked manageable can grow much larger by the time you exit. In a fast market, slippage – getting filled at a worse price than you expected – can add to the damage.
I always try to distinguish between a volatile market and one that’s offering genuinely strong setups. The two aren’t necessarily the same.
A good trade requires more than simply identifying which direction a market might move. You need to know where you’ll enter, where you’ll exit if you’re wrong, and – crucially – whether the potential profit justifies the risk.
For example, risking $300 to potentially make $100 profit may seem appealing if you’re convinced the market will move your way. But those odds need an extremely high win rate to break even over time.
And when volatility is elevated, the chances of a move reversing sharply against you also increase, reducing the likelihood of consistently banking profits.
That doesn’t mean avoiding volatile markets altogether. Some of my best trades have come during periods of heightened volatility.
The key is waiting for the market to provide a setup where the odds and potential payoff stack up.
Sometimes that means allowing the initial reaction to an announcement to play out before looking for a trade entry. Other times, it might mean recognizing that, despite all the movement, there’s simply no viable trade.
And that’s perfectly fine.
Trading isn’t about how many positions you take or how much action you manage to capture in a wildly swinging market.
It’s about consistently making good decisions and protecting your capital until conditions are favorable for a trade.
Happy Trading,
Larry Benedict
Editor, Trading With Larry Benedict
Reading Trading With Larry Benedict will allow you to take a look into the mind of one of the market’s greatest traders. You’ll be able to recognize and take advantage of trends in the market in no time.
