Michelle B submits:

When volatility is the name of the game as it has been this week, it is important to remain calm, focused, and honest. The name of the previous game was low volatility for several months. The push for performance and the angst at missing big opportunities presented by such volatility can knock traders off balance easily, including experienced ones.

Profitwise, this week of trading, so far—there is one more trading day left—has been very good for my account balance, and in analysing why I was able to do so well despite the abrupt reversal, I came up with the following:

On Monday, I exited a very profitable, swing long in FIG based on simply following my plan—its price reached my target so I closed it. Though skill, decisiveness, and patience certainly shaped the trading plan, it was luck that my target was reached the day before the sudden market decline. After the sale of FIG, I bought a swing position in WOOF on the same day, i.e., Monday.

When the market strongly gapped down on Tuesday, many stocks on my watchlist were down 6% to 12% and trended down all day, while WOOF bounced hard after its initial decline and basically stayed flat for the remainder of the day, approximately 2.5% down. I exited WOOF near the closing based on the damage I was seeing which had been made in technical chart patterns and upon the realization that I wanted as much buying power freed as possible to take advantage of big intraday moves. After the close, I found out that WOOF was in one of the few sectors hit significantly less than most others. Again, luck intervened in the sense that I replaced FIG with a stock that just happened to be in a sector that was spared pronounced carnage.

The previous week, I had closed a fairly profitable swing long in HIMX, a Taiwanese chip maker. On Tuesday, when the news of the Chinese meltdown hit, I was able to quickly place a short in a stock based on knowledge of chart patterns on various timeframes gotten from the swing trade which was done previously in HIMX. HIMX went down approximately 6% on Tuesday and another 6% down on Thursday. It was a lucky coincidence that a recently traded stock happened to be relevant to breaking news.

On late Wednesday, I was musing about taking a swing long in QID, but refrained, thinking that the consolidation following the morning bounce needed at least an additional morning to form before another leg down would follow. However, at that time I received my daily free email from Mike Paulenoff, whose analysis of QID was convincing enough for me to start an initial long position in QID. Luck surfaces yet again. On Thursday morning, the Q’s opened with a nice, fat gap down, and I was able to get about a 2.5 buck move for the overnight QID trade.

However, on Thursday morning, Lord Luck’s fabulous attention seemed to have dimmed a bit. My trading platform did not show the bid and ask for Qid during the first ten minutes after the open, and neither did it show the execution of my market order at the open nor update my buying power for the next 10 minutes. This lack of pertinent information prevented getting a better price for my shares and also slowed me down in choosing a vehicle to play the bounce. I remained patient and took a long daytrade in AKAM after the market pulled back in the afternoon. I was able to skim off a bit near the top of the recovery bounce.

I am very conscious of the role which luck played in my successful trading this week, allowing the keeping of existing profits and the additional accumulating of new profits. I will continue to maintain my discipline while learning how to adapt to this change in the trading enviroment from low to high volatility.