It comes as no surprise the record levels of volatility in the markets we’ve witnessed throughout 2020. A pandemic which artificially shut down the global economy, unprecedented moves in crude oil futures, global central bank policies adding massive amounts of liquidity to markets, and the arrival of tens of thousands of new hopeful day traders into the market place. (Thanks Dave Portnoy)

The day to day moves have truly been a sight to see. A chart of the VIX below shows just what we have been dealing with this year compared to levels in recent years:

The scope of the market moves in late February through March were something very few participants have lived through. Perhaps lived through to tell about it would be more appropriate. But a truth in markets and finance is that volatility is mean reverting, and exaggerated moves among assets will return to their calmer states in due time. After that parabolic like spike in the chart above, you can see that volatility began to calm down over the course of May and early June. Last week we got another flare up but I don’t expect it will last as long.

At social events, my gyms, and everything in between, I’ve become quite popular. People in Omaha know what I do and they know that I’ve been a student of the markets since before the financial crisis in 2008. More people are staying at home and with the temporary loss of sports and sports betting, our beloved stock market has become the de facto casino. Stories of stock, options, and futures traders turning small amounts of fun money into massive fortunes are cocktail party favorites. I’ve always loved them and will continue to, knowing full well that I won’t ever be a character in one of those stories.

I won’t be the hero of an overnight success story because I’m not gambling. Trading is not a hobby or a pastime. It is a job, and one that since I’ve had my teeth kicked down my throat by the market in the past, I have the utmost respect for. For every one overnight riches story there are multiple others that go horribly wrong. I came across this one yesterday:

Heartbreaking story of rookie trader who racked up $700K in debt: ‘Finance isn’t worth losing your life over’

I don’t mean for this post to come off as negative. If you are new to the game and have a small amount of money you are okay losing, by all means get in there and give it hell. You never know, beginner’s luck might be on your side. I know a handful of traders taking $1000 to 10k or $5000 to 25k. Just know that they are the minority and that even those select few with magnificent wins early on will have trouble hanging onto that fast money.

If you want to try and be here for the long haul just remember that trading is really damn hard. It’s frustrating, stressful and all encompassing at times. It is also extremely rewarding, not just from a financial standpoint. if you haven’t take a look at my post below about trading for a living.

Trading For A Living

I’ll catch you all soon.

Trent J. Smalley. CMT