The Right Tool for the Job

Any contractor will tell you that you need to have an assortment of tools in your toolbox to get a project done.  Each job requires a specific tool.  When you need a Philips screwdriver, hammer just will not work.  

In trading, each of our strategies is a tool.  Each one works during certain market conditions, but not every strategy can work for every market condition.  Many people are struggling to make money this week because they are using bull market, low volatility strategies.  There is a tendency to try to reinvent the tool, re-work it so it will be effective in all market conditions.  Instead, I think it may be time to put some of those strategies back in the toolbox for the next bull market.  Let's go back to the toolbox in search of some tools for volatile markets.  

For me, when volatility is increasing I find that I need to put on small positions and leave room to add more if levels get worse.  I also find I need to let my winning trades run more.

What trading tools do you use in volatile markets?

Written by Jennifer Galperin.  Follow me onTwitter and StockTwits.