Managing high volatility levels is a major challenge in this crazy summer market. Waves of intraday whipsaws have been the norm, ripping through logical stop losses and destroying perfectly good trading patterns. So what can traders do to survive this maelstrom, other than shutting down their screens and heading out for the beach?

First, we should talk about what not to do in this wicked environment. The greatest danger these days comes when executing the same-old-strategies that worked so well during the quieter periods of the last two years. No, it isn't business as usual, and many of the classic techniques taught in Trading 101 will trigger major losses.

So, whatever else you do, stop fighting the tape. How can you tell if you're headed down this path? Typically, your daily P&L will turn red early in the session and do a slow bleed into the close. This is the classic profile of a trader that's in conflict with the market, especially when it happens two or three times per week.

Look at your results in March and August 2007, as well as January and March 2008. If you're incurring the same type of performance errors in this market, you haven't learned your lessons and are in considerable danger. Readers repeating these mistakes should stop trading immediately and take time off to get their strategies readjusted.

Yes, this is a tough period for the financial markets. But you don't need to undermine your profitability just because it feels like the world is coming apart at the seams. So, to get back on track, here are 10 more things you can do to turn around your summer trading performance.

1. Lower Share Size: Smaller positions can move through greater daily ranges and not shake you out. They dampen volatility levels and let large-scale support and resistance levels work as intended with your trading strategies.

2. Limit Total Positions: Find just one or two promising opportunities in a session and work those trades to their final outcomes. Take off the rest of the day when they close out, rather than flipping the freed-up funds into new positions.

3. Learn To Daytrade: Shorten your time frame and play the quick bursts of buying and selling pressure during the intraday markets. Just make sure to get out as soon as momentum starts to turn and move on to the next opportunity.

4. Use Weekly Charts: Lengthen your holding period and trade off major levels delineated on the weekly patterns. This means staying out of the market for days at a time and waiting for prices to hit long-term buying or selling signals. Ironically, this strategy requires even more discipline than daytrading.


5. Become a One-Stock Specialist: Playing a single big mover, like Apple (AAPL) or Celgene (CELG), let you internalize price levels and know them by heart. The process frees your mind and reduces your vulnerability to negative news flow.

6. Find Unaffected Sectors: Not all stocks move in lockstep with the major indices. Take the time to find maverick issues that go their own way, even when massive program selling hits the tape. Right now, biotech stocks are filling this bill.

7. Forget Momentum: Chasing momentum is the single worst strategy in this market because sellers are hitting every buying spike, while short-sellers are getting squeezed after every plunge. A much better approach is to buy the dips and sell the rips.

8. Trade ETFs: Seek out exchange-traded funds that don't track the daily convulsions of the financial crisis.

9. Play The Indices: Sharp swings in the index futures and related ETFs trigger program-driven arbitrage through thousands of stocks. It's often safer to trade the indices directly because the patterns show early warning signals for breakouts, breakdowns and reversals.

10. Avoid The Midday: The most annoying price action these days pops up between 11 a.m. and 2 p.m. EDT. This is the period when computers and hedge funds attack price pivots, trying to break highs and lows to fish out the stops. So get your work done in the first hour and don't come back until everyone has eaten their sandwiches.


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