Tips for trading a grinding market
Trade Less
Often the volatility is still there, just not as much on the shorter time frames. This means that there is still opportunity for trades, but we have to take fewer high quality setups, rather than quick scalping volatility. The first ninety minutes of the day often has more quick movements, and then the latter half of the day is for scaling way back. Try to get your quick moves out of the way early, and let the afternoon be slower while walking up or down a stop.
Reduced slippage
Again in a grinding market, selling spreads, playing quick plays within an equilibrium rather than looking for directional trades are strategies that can allow you to play the chop without feeling like you need to commit to a direction.
Learn a sideways strategy
A stock with high liquidity is more likely to reflect the true value of the underlying company, as prices are based on the supply and demand of buyers and sellers in the market. This helps traders make informed decisions based on accurate market information.
Look for hot lists
When the market is trading hot, often the indices are a great place to be as most things are moving the same way, and the indices easily have the best liquidity. But when things are slower moving, smaller names will tend to shine with volatility as traders flock to them. Some of these can be incredibly volatile and prone to halting, but others are just slightly smaller cap names that run with good liquidity and just want their time to shine. Try to avoid names that are running 40% gap ups, and look at names that have high pre-market volume and large intraday moves that don’t correlate directly with the overall market.
Wrapping Up
The best thing to do during a slow market, is just look to slowly rack up small gains, while fine-tuning and back-testing strategies and keeping cash ready so when the volatility comes.
