Last week, I happened to catch Dennis Gartman on television commenting on the heightened US stock market volatility. When asked what traders should do in the face of the increased volatility, Gartman said they should “get small”. In other words, traders should reduce their position size as a part of their risk management. This is a normal course of action of some hedge fund managers – step to the sidelines in times of increased volatility.
Following are 20-trading day volatility graphs for PowerShares QQQ (QQQQ), iShares Russell 2000 (IWM) and iShares S&P/TSX 60 (XIU) .
QQQQ
IWM
XIU
Thankfully, the Canadian stock market is much less volatile than its US counterpart at present.
For those of you who subscribe to my systems on Collective2.com, now you know why I have partial positions.
FJP
