skip to main content
Coach's Playbook Posted by Team Topstep April 14, 2021

Trading Slow Markets

Low volatility is usually considered a sign of investor confidence that directly correlates to higher stock prices. During times of low volatility, it’s also typical to see a drop in volume and tighter daily trading ranges. With the VIX holding steady below 20 and equity index futures printing new all-time highs daily, we thought this would be an excellent time to talk about best practices when trading slow markets.

Funded Trader Shoutout

Since we’re here today talking about trading slow markets with small ranges, this funded trader shoutout makes perfect sense. With volume in the E-Mini S&P 500 futures (ES) hovering around a mere one million contracts a day, it’s plain to see that there is a lack of volatility in the market right now.

With that in mind, we do our best to recognize those Topstep traders who can see when the trading environment is changing and make the proper adjustments to their trading strategy to compensate for the slower price movements. So, this week’s coveted funded trader shoutout goes to none other than Lisa C., who capitalized on the tight trading rangers in the ES to chalk up a solid $1,900 trading day!

Trading Slow Markets

All markets go through periods of low volatility, and right now, we see it in the equity index futures markets. The CBOE Volatility Index (VIX) is below 20, and CNN’s Fear and Greed Index is right around the 50% mark. These are positive signs for investors, but as a day trader, how do you maneuver through a market that isn’t providing wide swings?

Tighten Up Your Strategy

When a market isn’t providing the kind of opportunities you’re typically used to, you need to adjust your strategy if you’re going to continue trading that particular market. You can’t expect to catch a big move when volatility is low. Tighter trading ranges mean smaller profit targets, so you can increase your trading size as long as your risk parameters can account for it.

Pay Attention To The Ranges

While range breakouts are inevitable, predicting when it will happen can turn into an expensive lesson to learn. Range trading may appear to be simple enough when you look at a price chart, but it’s very easy to fall by the wayside if you try to out-think the market. Keep playing the range until the market tells you that it’s time to stop playing the range.

Sit This One Out

If low volatility isn’t your thing, consider becoming an active observer until things start to pick up. Traders lose more money getting chopped up in tight ranges than they do being on the wrong side of a trending market. Keep that in mind if you’re just getting started in the business, and always remember to always play to strengths.

Trade Well!