How to Manage Volatility

//How to Manage Volatility

Hawk’s Scan Sentry Report August 29

Welcome to Hawk’s Scan Sentry Report. This is Sunday night with stock recommendations from Jan Arps’ Scan Sentry Toolkit for the week beginning August29.

Today I want to talk about the Triple Trender. As most of you may know, the Triple Trender is based on the Arps Trender run at three different sensitivity settings.  It has proven itself to provide good early trend identification signals when all three ‘Trenders’ come into alignment, meaning when they are all three on the same side of the price bars. The Trender is a very sensitive tool, and there is an aspect of it which adapts to volatility within its calculations. Therefore, in times like these where, for example, the Average True Range of the S&P e-mini contract has quickly gone from around 20 up to 45, it may become necessary to adjust the sensitivity settings of your Triple Trender until the markets settle down a little bit.  I have included a few snapshots of the ES contract with the Triple Trender applied at it’s default setting of 2,5,7 and then one again at 1.5, 3.5, 5.5.

Notice how when the volatility was much lower, the standard settings provided good signals indicating when the market was trending and when it became choppy and range-bound. Now that the volatility is double what it was then, it may be time to consider more sensitive settings until the volatility settles down a bit.

You may wonder how I came up these revised sensitivity settings. The last time we saw the S&P e-mini contract approach 40 from a lower range on the ATR indicator was in Februrary of 2008.  Notice how the more sensitive Triple Trender settings help us to navigate the trend better until the ATR indicator recedes back to around 20.

As we know in hindsight, the volatility increased as the year progressed and the market went over a cliff. Our future is yet unknown. As for me, when volatility doubles its average range, I use more sensitive Triple Trender settings.

We’re happy to announce that we’ve recently translated many of our most popular tools (including the Triple Trender) into Ninja Script for the Ninja Trader clientele, and I will be providing an introduction to some of those tools at a Ninja sponsored webinar this Thursday. Unfortunately, I won’t have time on Thursday to go into minute detail on all the ways you can use these sophisticated tools, but it should be a good introduction to anyone just becoming familiar with the Arps tools.  You can also get some good instruction at any time on how to use some of these tools on the videos page of our website.

So, without further ado, here are the stocks that our indicators are recognizing as potential trading opportunities this week. Remember, in these volatile times, stock trading becomes trickier and riskier. Never risk more than you can afford to lose.

And now for this weeks stock recommendations….

Longs_____Shorts

SGEN               KT

CBOE                DEI

FCN

May the trend be with you,

Hawk

Jan Arps’ Traders’ Toolbox is not an investment advisory service nor a registered investment advisor or broker-dealer and does not purport to tell or suggest which securities customers should buy or sell for themselves. Examples presented on this site are for educational purposes only.  It should not be assumed that the methods, techniques, or indicators presented in these examples will be profitable or that they will not result in losses. There is a high degree of risk in trading.  Readers using this information are solely responsible for their actions and trade at their own risk. Readers should always check with their licensed financial advisor .

2018-01-08T08:30:44+00:00August 29th, 2011|Hawk's Picks|