Here are the partial profit-take threshold and stop levels for today’s long Sept S&P e-mini trade. This stop is calculated for a full allocation of capital to the trade, even though you may have taken only a partial position because of extreme volatility today. As usual, the stop is calculated to keep risk constant adjusted for the volatility of the instrument over the most recent 25 trading days. This adjustment may not be sensitive enough when very sharp increases in volatility occur, such as we have seen in the last 3 days.
In such circumstances it may be prudent to build positions over several days, buying a part at a time in addition to trading in-and-out when the market moves quickly into profit and back again. This position quickly showed a profit of 26+ points after buying it, which we would probably use to take some profits, expecting that the market would visit the first entry price again (as it did) where we could replace the position.
We don’t issue advice to do this because of the impossibility of keeping our recommendations fresh in such fast-moving markets, but it is obviously sensible to do exactly this when volatility suddenly jumps.
