The markets have remained very volatile over the past several weeks. At the time of this writing, the S&P 500 had fallen over 2.3% in a day. It has been a bumpy road over the past few months for sure, and most likely it will continue to be for several more. Even though the markets have been uncertain, there is something you should be certain about and that is to be patient and wait for opportunities.

Resist the Urge

As traders, it can be difficult sometimes to stop ourselves from jumping into spur-of-the-moment or gut feeling trades. Trust me, I have fallen victim to being too aggressive many times. But having control and patience is much easier if you follow a well-written trading plan. When the market sells off as it did the other day, implied volatility levels surge higher. Many option traders are taught or encouraged to think that selling put spreads under these conditions will enable them to take advantage of “more expensive” premiums. But what if the underlying continues to move lower as they often do? Traders might have sold elevated premium, but they are getting run over by their positive delta positions.

Wait for Setups to Trigger

When it comes to opportunities based on technical analysis it always pays to be patient, but even more so in volatile markets. Of course, no one can predict what the next day will bring, but waiting for setups to trigger is essential. When the market is moving, traders tend to get jacked up and chase stocks instead of looking at potential support and resistance levels, especially on smaller time frames.

Just appreciating that support and resistance will fight to hold that level is a big advantage (70% to 80%, in my estimation). When a stock or the market is extended higher or lower, ask yourself what has a better chance of happening. Odds are the underlying will not to continue in that direction into the close.

Final Thoughts

Small things like not trading at times and saving yourself from huge losses can obviously make a major difference to your potential for success. Many if not most times it boils down to having patience. So next time you feel like you are acting on the spur of the moment, slow down and ask yourself, is this the right thing to do and is this the right time to enter? You probably already know the answer.

John Kmiecik, Market Taker Mentoring