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Easier Said Than Done – WSE Pro

The market revved its engines overnight and lifted off this morning, closing strong but with a few bumps along the way. It was a day of extreme volatility, with the Dow at one point gaining 95 points in 5 minutes—not the kind of thing that gives a trader a lot of confidence about the market.

The huge increase in volatility over the past few months is a symptom of a market becoming more illiquid. It just doesn’t have the depth of bids and offers that it did before the July top when the credit and liquidity crisis first burst into full bloom. Increased volatility is something we are going to have to get used to. Under these conditions we will need to stay focused on smoothed trend measures and indicators, so as not to get shaken out of good positions too early, or sucked into bad positions at all. Easier said than done.

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