Video Transcript:
Yeah, I mean, in this environment there’s something to be said for booking profits and scalping, because—again—I’ve said this for the last week or so: these are not normal conditions. You know, the VIX being elevated up to 30, 40, 50, even 60 is not normal. An ATR on a 10-minute candle is, right now pre-market, at 8, 8.5, or 9—and it has been up to almost 20. I’ve seen it in the pre-market, and when the cash session hits, I’ve seen it up into the 55s, which is untradeable if you ask me. There’s no way—unless you’re really momentum trading—that you can operate in that. If you’re really good at momentum trading, maybe that’s your thing, I don’t know. I can’t seem to make heads or tails or make any kind of decisions in those kinds of conditions. I just think that when I do enter a trade, the heat is just a bit too much for me.
Yeah, I know you’re supposed to let it ride and handle a bit of heat, but it’s just… yeah. I mean, for sure, there is that balance of not suffocating a trade and not exposing yourself to too much risk—and that really comes down to the preparation of the trade and the position sizing. You know, if you’re working off a $50,000 account and you’re trading 10 contracts, that’s a lot. That’s a big percentage, especially with an ATR even at 10. Think about it: 10 contracts at an ATR of 10 means you’re risking—what is that—$5,000 per trade. That’s a lot. That’s 10% of your account on each individual pull of the trigger.
So my suggestion, especially when rates—or when the VIX and the ATR—are what they are, is to scale down if you’re going to engage at all. I mean, I know a lot of people who just sat out last week. They didn’t do anything. It just becomes unreadable. And I mean, for the way that I trade—and the way a lot of folks trade—you just can’t make decisions when the market’s moving that fast and you’ve got to risk that much. I’ll bet it was probably a very healthy week for the prop firm industry last week.
Oh yeah, absolutely. With this volume and volatility, I remember when I used to clear for them—they used to make massive, record profits every time in these conditions. I guarantee you they’re collecting that reset fee like crazy right now.
Yeah, sorry—I was talking about the hedge funds and the big prop trading firms like Jump Trading. They’re making a killing. I mean, there are some models out there that thrive in this environment. Mine’s just not one of them. You’ve got to understand where you’re willing to risk capital and under what conditions. I’m sure there are people out there making a killing on this increased volatility. I do like increased volatility, but there is a threshold. There’s a law of diminishing returns—as soon as the ATR gets above 15 or 16, that’s where it kicks in. I can’t make solid decisions when the ATR is 20 points per candle. That’s just the way I trade. I know that about my technique and my strategy.
So when it gets up to that level—unless there’s a setup smacking me right in the face—I’m not taking it. And even if I do, it’s going to be on the micros in those conditions because I’m just not willing to engage much in that type of environment. There are times to step on the gas pedal and lever up, but right now is not one of those times—at least for the way that I trade.
How long do I think this environment lasts? That is the multi-trillion-dollar tariff question, isn’t it? It lasts as long as the uncertainty lasts. It lasts as long as China and the U.S. are locking horns.
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