Traders Adapt Mindset, Strategy For Volatile Market


Simpler Trading Team

4 min read

Was it fear of hurricane Ian after effects or an underlying surge of negative economic data that sent the market into a selling freefall on Thursday?

This market continues to test new lows, even after a relief rally. Most of the gains from the Wednesday session were erased after the bleeding today.

Traders are struggling to get a sense of any sustained direction.

“This market is really tough to read,” said Bruce Marshall, Senior Director of Options and Income Trading at Simpler Trading. “We have to continue to be careful.”

Bruce has adapted to this wild market with a change in strategy throughout this year that shies away from long-term trades and defaults to shorter term options contracts on the indexes or select individual stocks.

“The best thing to do in a market like this is to proceed with caution and be very strategic with your trades,” Bruce said. “This market is really tough to read. We have to continue to be careful.”

Adapt mindset, strategy for volatile market

Bruce actively adapts his mindset to not get locked into the latest market move, and is skeptical of any sudden change. He considered the relief rally Wednesday as not a definite change in overall market direction. The harsh sell-off today proved his insight to be correct.

“With this market we have no idea which way we’re going to go in three hours from now, much less 30 or 60 days from now,” Bruce said.

He has been trading almost 34 years, targeting swing trades over weeks or months, but is now comfortable taking smaller gains on less risky trades over shorter time frames. The movement of this market – up, down, or sideways – can be vicious.

“The biggest thing in a market like this is that we’re getting whipsaws back-and-forth, back-and-forth intraday, so manage your trades,” Bruce said.

“You just can’t get married to one side or the other,” Bruce added. “The market is surely not showing its hand at this point.”

Bruce has focused on trades in the indexes, and targets the E-Mini S&P 500 (ES) Futures. The low so far this week, pushing toward 3,600, is a level he has warned about for months.

He is not beholden to any speculation that the market has hit bottom, as he has seen projections where the market falls further to 3,100 on the ES.

Bruce highlighted a 10-year chart on the ES with the level near 1,400 in 2012. Since then the chart shows the market in a steady long-term trend higher, even into the sell-off today. That 10-year span shows a lot of real estate where the ES could drop below what anyone is speculating.

“We could pull back further,” Bruce said, explaining how he has no plans to revert back to “buy the dip” strategies because of a sudden sell-off that may not last until the next day.

Follow economic data points for clarity in trading

Economic “data points” are what Bruce is following in the coming weeks, watching for more clarity on how the market might move as fall quickly transitions to winter.

Before the next Federal Reserve meeting on Nov. 2, Bruce pointed out significant economic data releases before the market considers the possibility of another benchmark interest rate hike.

U.S. nonfarm payrolls are set for release Oct. 7, followed by U.S. Producer Price Index (PPI) and U.S. Consumer Price Index (CPI) numbers the second week of October. CPI measures consumer expenses for staples such as housing, gasoline, utilities, and food. PPI tracks wholesale cost changes – the price of goods sold by manufacturers.

For traders, insight into surviving this market sounds like a drawn out car ride with all the passengers asking, “Are we there yet?”

Traders won’t know the market has hit bottom until it does.