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Extreme volatility leads to contraction of volatility


The President of the United States wearing a trader's shirt from the Chicago Mercantile Exchange !
The President of the United States wearing a trader's shirt from the Chicago Mercantile Exchange !

With a single tweet the President of the United States pushed equity indexes to record gains in one day, the highest since 2008. Some insiders had a very, very good day on April 9, 2025 !





This makes a good headline, doesn't it! But what's next? It is very hard to position yourself in any direction right now. One trick in these market conditions is to lower your size and put some trades on both the long side and the short side when swings get too extended. One can use a linear regression tool or simple trendlines to achieve that. Aim for short term profit taking. Take profit often!



You can see how we fade big standard deviation moves and take profit often (SPX 30 min chart).
You can see how we fade big standard deviation moves and take profit often (SPX 30 min chart).

Why play short term ? After such extreme volatility in both sides, one has to expect a contraction of volatility or coiling (consolidation) conditions for a little while. Like this (Weekly chart of the SPX):




Good luck!

 
 
 

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