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The market in recent months has created exceptionally difficult conditions to trade. Low volatility and obscure price action has reduced the volatility available for traders to capitalise on. These conditions have affected FOREX, Equity, and Index trading.

It has been specifically difficult for momentum and trend following traders as a certain level of volatility is needed for trader to return profitable trades. How to spot low volatility The Average True range or ATR range can be an important indicator in determining the level of volatility in a market or asset. It measures the average trading range of a particular asset’s price over a period.

It can exceptionally be helpful in determining how volatile the asset is at a certain point in time, or how volatile an asset is compared to another one. For instance, looking at the ATR for the Dow Jones, it has been getting progressively lower and is at its lowest level since August indicating a reduction in volatility. The Market Volatility Index or the VIX measures volatility across the S&P 500 is also an important indicator to not just gauge market volatility, but also general market sentiment and emotion.

When fear and greed are prominent in the market volatility tends to increase and when they dissipate, they tend to decrease. As the chart shows, volatility has been reducing to levels not seen since the rally in August 2022. The characteristics of the chart are also interesting as the VIX acts much more in waves then other indices do.

How can you optimise your trading during periods of low volatility? Tips for trading in low volatility markets Understand that breakouts will fail. Specifically for traders who like to use strategies based on momentum breakouts, during times of low volatility the price means to stay close to moving averages and mean price points both on an intra and inter day level.

Wait for confirmation before a momentum move. Although breakouts are less common in low volatility markets, they do still occur. In this instance, it is ideal to wait for a confirmation or retest of an important level before entering trades.

Confirmation can be supported by strong candle in support or increased volume. Being patient is essentially in times of low volatility. Opportunities that may have otherwise eventuated.

Utilising volume and strong candlesticks as secondary Price tends to stay close its mean. This means that if a price does break out or break down, the price often swings back to the mean. The mean may be a simple moving average, Volume Weighted Average, or some other measure.

In essence it does not really matter what is used, rather than the price tends to retrace back to the mean in some manner. Therefore, these conditions lend themselves to mean reversion systems or strategies. As seen on the chart below, the price has reverted to the 20-period moving average on multiple occasions.

Using multiple time frame analysis for identifying support and resistance. As previously stated, when there is low volatility, finding real breakouts that will last becomes more difficult. By ensuring that the breakouts or breakdowns in price are occurring across multiple timeframes a trader can enhance their chance of it being sustained as their will likely be a higher level being traded at longer term levels.

Trading can be difficult during periods of low volatility. However, this does not mean traders should not trade. Rather, traders should be aware of potential obstacles and difficulties that may arise and the strategies that can help work though these difficulties.

The FTX bankruptcy case has been a fascinating study in the failure of corporate governance providing a warning to the Cryptocurrency industry that a lack of regulation will not excuse poor financial management and that these exchanges are not immune to failure. In the last week, the company engaged distressed company expert, John Ray III to take over control as the company's CEO as it declares bankruptcy. Ray who has helped companies such as Enron wind up their business and dealt with fraudulent and criminal business activity will help wind up the company.

In FTX’s Chapter 11 Bankruptcy filing, Ray provided some intriguing insight and warnings for other business and companies that may be in a similar boat, stating “Never in my career have I seen such a complete failure of corporate controls”. For market participants the information out of the filing is helpful in providing direction for potential investment and trading decisions going forward. Overview FTX, prior to its demise was the world’s second largest cryptocurrency exchange under the management of founder, Sam Bankman-Fried.

The initial announcement of the company failing, lead to a drop in the price of Bitcoin by almost 25% and a panic in the market and FTX losing a rumoured 1 billion dollars in customer funds. Outlined below are some of the key issues that Bankruptcy filing found as being responsible for FTX becoming insolvent. Cash Management The issues highlighted by Ray, included a lack of cash management controls.

The company did not maintain accurate books and cash accounts and currently is not able to locate accurate accounts and transaction history to verify its positions. This means that currently, there is no clear indication of how much money the company on its balance sheet. Disbursements and record keeping The company’s management and control of its disbursement were so poor that it was not “appropriate for a business enterprise”.

For example, there were no records of loan documents, for money used purchase homes for employees. In addition, wage requests made by employees were made and approved with the use of personalised emojis and messages that automatically deleted after a short period of time. The lack of record keeping was also evident in its management of the actual digital assets under it held.

There was no record of the coins or digital assets that the firm was holding for its customers. This adherent lack of record keeping has made it increasingly difficult to work out the financial position of the company. Auditing Failures This also leads to the next major issue which was the auditing opinions.

Although most segments of the business were audited, Ray, made it clear that none of the opinions should be relied upon by current and future stakeholders. In addition, there has so far been no indication of auditing performed on Alameda and Venture segments of FTX. The failure of the auditing process was an essential risk management measure that was missed.

Lack of Employee records The failure in governance also extended to Human Resource Management within the company. No clear records of employees and contractors have been found and even now there is no clear indication of how many employees FTX, and its various subsidiaries had. In fact, the problems relating to employee records have been so poor that there has been difficulty even locating some of members of the workforce to verify their employment.

Ray ended the filing with perhaps the most damming statement of all which was that Sam Bankman Fried does not represent creditors and that his current actions are not only problematic but highly irrational including social media posts that he currently engages in. The lack of regards and contempt held for Bankman Fried is indicative of complete failure from the senior leadership team at FTX. The situation at FTX has been brought about by a sector that hides itself behind low regulation and complex technical language that allows it to escape much scrutiny and criticisms.

The environment of ambiguous leadership roles and no clear focus on compliance and risk lead to a situation whereby failure on such a large scale has been allowed to occur.

Bitcoin, the currency of tomorrow, a new age currency, has seen some severe ups and downs over the last few years. From reaching highs of nearly 70,000 dollars to dropping to lows of 17,000 the volatility and action around the cryptocurrency has been startling. Even compared to other traditional currencies the range and volatility of the price has been far more aggressive.

In fact, when compared to other more volatile tradable assets such as indices and equities, Bitcoin still stacks up with how volatile it is. For traders this is an important aspect to consider when deciding what to trade. Recent Chronology Early on, there was a thought that Bitcoin would become a hedge against inflation, or an alternative to Gold or Oil.

With the recent wave of record high inflation that has swept up much of the world the leading cryptocurrency failed this test, and this proved to be wishful thinking. In fact, Bitcoin showed itself to be quite the oppositive of a hedge and was rather much more aligned with growth assets such as the Nasdaq and the technology sector. Prior to May 2022, the Nasdaq and Bitcoin has a correlation of 0.82 out of 1.

In addition, with still so much unknown about how governments and Central Banks will come to treat the cryptocurrency and what regulations may be implemented there is a lot of uncertainty about how market regulation will affect the supply and demand. The chart indicates just how correlated the Nasdaq and Bitcoin were, sharing similar peaks in mid-November 2021 and following very similar price action until July 2022. However, after July there has been a shift in the correlation.

Today, Bitcoin is neither correlated strongly with either Gold or the NASDAQ and has carved out a niche for itself. Whilst the Nasdaq has continued to fall, Bitcoin has seemingly found its bottom. The price of Bitcoin has reclaimed its 50-day moving average which is its short-term support, and the price looks like it may continue to move up.

The range of Bitcoin has also become much tighter indicates, that the overall volatility has reduced and that the price has reached some level of equilibrium showing that neither the buy nor sell side has been able to gain any ascendancy. Due to how vicious the selling has been this may very well indicate the last of the selling. Importantly, even with the increased liquidity that has flowed into the asset from institutions and ETF’s, the price has still been able to find support and not fall int a liquidity vacuum.

Where it fits in? The recent price action brings up a more existential question which is where does Bitcoin fit in on the spectrum of safe to risky assets? Based on the information presented above there is no way that Bitcoin should at this stage be considered as a haven asset.

The price is still too volatile to be considered a safe asset. In addition, there is still so much unknown with how the price might react in the future, specifically regarding future regulations. On the other hand, Bitcoin has exhibited some characteristics of a safer asset, mainly, in recent times, its increasing resistance to high volatility and wild price fluctuations.

This may indicate that it is maturing as an asset. Therefore, at this stage of its life it may be best to classify Bitcoin in its own quasi- growth basket. When analysing Bitcoin for potential trading or investing opportunities it is important keep in mind that it does not act like a traditional asset.

Stop loss hunting is frustrating, annoying and can be detrimental to any retail trader. The premise of stop hunting is that large systemised institutional trading strategies know where the average retail trader or most traders will set stop losses and therefore profit off triggering these ‘stops. Their own algorithm will then deliberately, trigger the stop losses.

For traders there are few things as frustrating as have a well-positioned trade, being stopped out and then watching the price reverse in their original direction of the trade. What is a stop loss? Understanding stop loss hunting requires a simple understanding of what a stop loss is.

A stop loss is a trigger on traders’ position to close the position at a certain price. Generally, once triggered the position will attempt to be closed at the specified price. Stop losses provide an important role in risk management for many traders.

Generally, traders use stops losses to avoid emotional mismanagement and better manage overall risk by having clear exit points for the trade in worst case scenarios. The second element that is important to understand is where traders put their stop losses and why. Retail traders often place their stop losses near important market structures also known as support and resistance levels.

These areas represent strong zones of supply and demand. When support and resistance zones become more and more consistent and more obvious, it can create a clump of stop losses. These stop losses can be thought of as orders that must get filled if the price reaches those points.

This creates an attractive opportunity for large institutions with powerful algorithms that can push the price down and generate profits by ‘stopping out’ traders by triggering these stop losses. Once this process has occurred, the price will often move back in the direction the original trades were positioned for. Why would a system want to trigger stop losses Firstly, when stop losses are triggered, a price tends to see an increase in relative volatility.

Therefore, it may indicate the beginning of a reversal which sophisticated traders profiting. It also allows these large institutions to maximise their own existing trades as it may allow for better entries. Common areas for where stop hunters will look Stop Loss hunting tends to be most active around significant and clear areas of support and resistance.

This is especially true with regards to commonly traded assets. However, stop loss hunting can occur in all assets with various sizes. A stop hunt can be seen often with a small candlestick and a large wick.

In addition, they often occur on very short time frames. Common Area for Stop Loss Hunting At key moving average levels Clear Support and Resistance Levels Historical Support and Resistance Levels ie, Multiyear levels How to deal with Stop Loss Hunting? The obvious tactic to deal with stop hunting is to lower the stop loss below the obvious support and resistance level by a factor of maybe 10%.

This may require smaller trade size, but overall will allow the trade to hopefully avoid these potential stop losses. Treat support and resistance as areas instead of specific price points. Support and resistance do not exist at one price and rather a range of prices that are supply and demand zones.

Therefore, placing stop losses below these 'zones' may put the trade out of arm length of stop hunters. Simply being aware of stop loss hunting may provide some reassurance when a sharp spike in price occurs, to remain in the trade and not exit immediately. Ultimately, Stop Loss Hunting is just another challenge that traders must deal with in the pursuit of profit.

However, with some knowledge traders can adequately accommodate these tricky occurrences.

Mean reversion strategies are some of the simplest trading strategy’s used by sophisticated traders. However, when most traders hear the term, they immediately get confused. So, what is mean reversion and why do traders use it as a strategy?

Mean reversion is the tendency for the price of an asset to move back to its long-term average or mean after explosive moves to the up or downside. Traders can therefor capitalise on the end of these explosive moves by going long when the price has broken down and will revert up to the mean or short when there has been a strong move to the upside and the price will fall back to the mean. This strategy is often compared to trend following strategies in which the price tends to moving solely in one direction over a significant period with traders entering at the lows and exiting at the highs.

Mean reversion strategies can actually be used conjunction with a trend following strategy as trend following strategies will often pullback to the long-term mean. What is the mean? The mean is quite simply the average of a price over a time period.

In trading, the average can often be shown by using a moving average of mid points of ranging price. For instance, on a long term a significant average that is seen as the mean is the 200-period moving average. The 200-period moving average is used so often because of its length.

It provides an average over a significant period of time. Other averages that are often used include the 50 Period moving average and 100 period moving average. All three can be used in different ways to measure different reversions to the mean.

On a shorter timeframe, the Volume Weighted Average Price of VWAP is often used as a short-term measure of the mean as it adjust the price for the volume traded as well. What is the premise behind the strategy? The idea behind the strategy comes from the basic principles of supply and demand.

The price of an asset adjusts up and down until the there is a point of equilibrium or where the buyers and sellers reach a stalemate which then becomes the mean. Economic principals say that over time at some stage this phenomenon must occur. Therefore, even if the price of an asset or exploded, at some stage it will have to revert to the mean.

In addition, this process will occur regardless of the time frame. Over longer time frames, the process will still occur, although it may take much longer. For instance, if looking at the daily/weekly time frame, the process may take days and weeks to eventuate.

The examples below show how a simple mean reversion strategy can bring about large potential gains. Whilst this strategy can be extremely profitable it can also be risky because it can contradict some of the psychology that trading is built on especially in the short term. The mean reversion strategy requires the market to price assets based purely on the long-term supply and demand and markets do not always act rationally.

Emotions such as fear, and anxiety rule the market which lead to price action that can put pressure on these types of strategies. On both examples, after significant price movements towards the upside and downside, the prices peaked or bottomed and then returned to their long term mean indicated by the blue 200 period average.. Utilising a mean reversion strategy can provide high return opportunities for traders who can master the skill and strategy.

For new traders, it can be difficult to know which indicators to use, the saturation of various moving averages, RSI’s, MACD’s and more can be overwhelming and counterproductive. However, utilising relative volume, as an indicator is one of the most important sources of information for technical traders. What is Volume?

Volume is quite simply, the volume of the asset traded over a specified time. This volume is usually shown by bars, generally located at the bottom of a price chart. Each bar represents one unit of the corresponding time period’s volume traded.

It also shows whether the period ended in the green or red. Volume tends to be reflective of the interest in the asset and is therefore a valuable tool. Why Relative volume?

Now that there is a clear definition of what volume is, understanding relative volume is straight forward. It has been established that volume is indicative of the amount of the asset traded for that time. Essentially, most assets will have a consistent or average volume that gets traded over a specified time, whether it be an hour, day, or a week.

Generally, the longer the time frame, the more weight a trader should give to that average. A large spike in the volume relative to the average is what a trader should be looking for. The volume bars are the best indicators of this.

Larger volumes can indicate larger positions being taken and increasing interest. Therefore, increases in relative buying volume can be a leading indicator for a move to the upside. On the contrary, a large red volume bar can be a leading indicator that price drop is about to occur as a large position is exiting.

A rule that many retail traders like to use is to follow the “big money” or institutions. Big institutions cannot just enter or exit their positions quickly like retail traders. Therefore, these institutions leave a trail of their entries and exits, that experienced traders can capitalise on and follow.

Understanding how shifts in volume can indicate, potential break outs, break downs and reversals takes time and practice but is a valuable tool that any trader should utilise to improve their entries and exits. A few examples of volume indicating changes in price action. Apple's sharp increase in selling volume indicated the ‘top’ and has not reached those high since.

Similarly, the chart for Brent Oil showed a similar pattern whereby it could not breakthrough a long-term resistance level and combined with a large volume of selling signaled that the price had peaked. The price for Stanmore Resources saw a big push after the influx of new volume and has its price increase since the first candle. This may indicate that institutions have added the company to its holdings or that significant buying interest has returned.

Further way to optimise using relative volume Anticipating Relative volume shifts by understanding that they tend to follow on from big news events, such as unexpected results or broader macro factors. Combining big volume shifts with a break of a key support or resistance level Combining with other technical indicators. Use a collection of volume bars vs just one to see the shift in relative volume