On the night of Election Day, Nov. 8, 2016, the E-mini S&P dropped over 120 points. This crash occurred when Donald Trump began dominating the Electoral College. Trading on or around Election Day is almost always volatile, but in this case, the unexpected truly happened. For months prior, nearly every poll consistently predicted Hillary would win by a landslide. The opposite happened, and when it became clear the likely president would be Donald, the market reacted. Markets "like" stability. When a controversial figure becomes leader of economic policy and the Republican party retains control over the Senate and the House, the market is likely to remain unstable. Despite the crash, the market recovered the next day, Nov. 9 and has been within fairly normal ranges. The abnormality comes from how regularly high the ATR has been. This is what John Paul focuses on in this webinar video:
His favorite tool for assessing volatility is the ATR (Average True Range). It's not a tool for direction. It averages the highs and lows of the last X number of bars (we prefer four) and provides a value and a line on the bottom of the chart. When the value is between one and four points, the market is good for trading. Above or below this range indicates too little or too much volatility. The ATR is a measure of "how far the market can move in a given moment," according to John Paul. As such, he uses it to determine the profit target and stop loss for each trade. Another way to manage risk is to use trailing stops. At around 45:00 in this presentation, John Paul shows how trailing stops trail the profit target to lock in a smaller loss, breakeven, or even a smaller profit. It's tempting to trade during volatile conditions because you may expect the market to reach over three points on one trade. That can be a lot of money. A trailing stop, if executed correctly, can a sort of parachute. NinjaTrader has a built-in feature for trailing stops. You can also manually manage your stop by enabling ChartTrader and using an ATM strategy. This shows the red stop loss line on the chart and allows for custom placement.
Check out the video above if you just want to see the Atlas Line trades from the webinar. There were three really nice trades here. Remember that John Paul often uses 1 * current ATR value (with ATR set to 4). First, a trade worth 2.5 points. The entry was at 2164.24. The market was volatile enough to go four points in the profit taking direction. Next, a trade worth 3.5 points with a signal at 2162.50. Again, the market pushed on through the target. It's better to be conservative and stick to the rules. The third trade, a long, occurred in the afternoon. That trade was worth two points with an entry of 2158.75. Remember the Mentorship Program provides the Atlas Line with a lifetime license. All of the other courses and software are also included. Training is twice a week with John Paul. His goal is to make you into a professional trader.