Yet again the OVI has done a fantastic job of keeping us at a safe distance from – or on the right side of – market dramatics. This chart of the SPY shows its OVI as almost exclusively negative since early June.
The same goes for the OVIsi which has been red since June 22nd, enabling us to prepare for the volatility that has manifested, and keeping our automated traders out of harm’s way.
The funny thing is when I hear from from other (non OVI) traders, who are trading full time but are getting themselves into all sorts of bother. Only yesterday I received this message on LinkedIn from a full-time non-OVI trader:
“Hi Guy, … How would you play these markets? … I am fighting against the market volatility at the moment and am glued to my desk … Can I contact you after the close?“.
As OVI traders we are never ‘glued’ to our screens and we do not ‘fight’ the markets. We typically trade with a defined trend or high probability setup, and only where the numbers are firmly on our side.
Trading should be all about focusing on the high probability setups, not trading for trading’s sake. We know from independent studies that the OVI does give high probability, so we know we have an advantage from the outset.
Yesterday the markets were awash with the drama of the Fed meeting. As an OVI trader you were either bearishly biased or you were patiently waiting for a high probability setup. No drama with us whatsoever. The more aggressive OVI traders have done very well in this bearish phase of the markets, and the less aggressive OVI traders have stayed safe with their capital in tact.
Compare that with the panicked message I received.
Next week I’m holding my regular Market Review Webinar to which you are invited. It will be at 2pm ET (7pm UK time). We’ll do a full market review and identify any worthy setups.
