top of page

Trading High Volatility

Don't get whipped out of trades due to high volatility.

With volatility picking back up last week we need to make sure our trading plan has the proper rules so we can profit from this type of movement. You can't have the same trading plan for a low volatility market and a high volatility market. If you are trading with a tight stop loss you could easily be whipped out of trades due to the large spikes we see in either direction, this can even happen when we enter into trades that fit our rules and end up turning into winners once we get stopped out. So what can you do to?

#1 Drop size

If you are trading a few contracts on the E-Mini S&P 500 think about dropping down to one. Now I'm sure the first thing that will come to mind is "I'm going to make less money" , yes you are partially correct and we will touch on this down below on how to actually make this work in your favor. By dropping your size you are also dropping your risk, like we talked about above if you have a tighter stop with a larger amount of contracts then your risk is going to be much larger then if you used one or two contracts with a slightly larger stop loss. By dropping your size you will be able to increase your stop loss, aim for larger targets and not put your account at risk.

#2 Stop-loss

Before you even think about entering into a trade you should already know what your stop-loss is going to be and it should be automated. If price hits your stop level don't rely on your self to close out the trade use an ATM to auto close the trade for you, this way you wont have to battle any of your emotional demons when taking a loss. By dropping the amount of contracts/size you are trading you will be able to have a wider stop-loss. When the market gets very volatile like we saw last week, it is very easy for your stop to get hit and then have the trade end up working out.

Now before you even think about moving your stop-loss you need to know your max risk. NEVER move a stop-loss past your max risk. Some of you might be trading one contract on the ES, if so then think about moving down to the MES. You will be able to have a larger stop and not worry about your risk or being stopped out if the trade moves against you for a few minutes. Once you know your max risk then you need to back test what an good size stop would be. For those of you who are Gorilla Futures Members use the same method we use to find a normal stop-loss for finding your higher volatility stop-loss.

#3 Profit target

With higher volatility we can expect the market on most days will be make much larger moves in either direction. This is where traders can make up for reducing there size. If you normally aim for a few points with three contracts, start aiming for 10+ points with one contract. This way your risk will be less, you are allowing your trades extra room to work out and actually shooting for a larger target where traders could potentially make large profits.


Before implementing this type of trading be sure to back test and find out what works best for YOU. Need help with your trading? Follow this link and become a Gorilla Futures Member today!


bottom of page