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Don Kaufman here. |
It's time to stop living in the past and start trading like you belong in today's market. |
Forget fundamentals—they're like cassette tapes: interesting, but irrelevant. News stories? |
Fun to read, but they won't pay the bills. This market isn't about what should happen; it's about what is happening. |
And guess what? It's all about order flow, volatility, and liquidity. |
If you're still out here asking "why" the market is moving, you're already lost. Let's talk about the how instead. |
Stop Asking "Why" the Market is Moving |
Here's the deal: the market doesn't care about opinions—yours, mine, or even Jerome Powell's latest nickname from Trump. The only thing driving this wild beast is liquidity and order flow. |
Take today as an example. The Dow's up 1000+ points, and everyone's losing their minds over some comment from Treasury Secretary Scott Bessent about "trade de-escalation." |
Sure, that sounds nice, but let's not kid ourselves—this isn't about trade deals. This is about algorithms piling on top of gamma squeezes and momentum-driven flows. |
Someone hedges a position, dealers start buying, and next thing you know, the market's ripping higher like it just had a double shot of espresso. |
Here's the reality: markets don't move cleanly because of headlines or fundamentals. |
They move because someone hit the "buy" button, and algorithms decided to jump on board. Stop asking yourself why it's happening. Start asking yourself how you're going to trade it. |
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This Market is a Liquidity Game |
Let's get one thing straight—this is no longer a rational, tidy market driven by logic. |
It's a chaotic, liquidity-starved game of chicken. |
And guess what? The machines don't blink. |
When liquidity is low, even the smallest orders can create massive ripple effects. |
That's why today's 1000-point rally feels so disconnected from yesterday's 970-point sell-off. |
The market didn't "change its mind." The flows flipped, and there wasn't enough liquidity to absorb the move. Simple as that. |
And then there's gamma squeezes. You've got dealers hedging their short options positions by buying stock, creating this feedback loop that feels unstoppable. |
The result? Big moves that have nothing to do with what's on CNBC. |
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Forget the News—Trade the Setup |
Let me spell it out for you: the news is noise. |
Headlines about trade wars, rate cuts, or tariffs might create a little volatility, but they're not the real reason the market moves. The real action is in the order book. |
Take today's rally: Bessent says there's hope for a trade deal with China. Great. But is that really new information? |
No. It's just today's excuse for the algos to keep buying. Yesterday the excuse was "uncertainty," today it's "hope," and tomorrow? |
Who knows. But here's the thing—you don't need to know. All you need is to trade the setups these narratives create. |
Here's the harsh truth: fundamentals don't matter in the short term. Analysts can write all they want about tariffs hurting margins or slowing growth, but it's not why the market is moving. It's moving because traders are reacting to hedging flows, not earnings estimates. |
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Volatility is the Only Thing That Matters |
Now, let's talk about the one thing that actually does matter: volatility. The VIX is your compass in this chaotic market, and it's telling you everything you need to know. |
Even with today's rally, the VIX is still sitting above 30. You know what that means? This rally isn't as stable as it looks. |
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High VIX = high uncertainty. |
That's your signal to stay nimble. Even as the market climbs, traders are still hedging their bets, and you can bet there's some two-sided action ahead. |
When volatility stays elevated, sharp reversals are always on the table. |
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How to Trade in This Environment |
Alright, let's get down to business. |
You're not here to listen to me rant—you're here to figure out how to make money. So, how do you trade in an algorithm-driven, high-volatility market? |
Stick to Liquidity: Forget small caps or low-volume names. They're dead money right now. Focus on the big players like Tesla, Apple, and the S&P 500. These are the products algos love to play with, so that's where you'll find the action.
Use Defined-Risk Trades: Don't go blowing up your account trying to catch reversals. Use spreads, like verticals, to keep your risk in check. For example, if you think today's rally is overblown, buy a put spread on the XSP (mini S&P options). It's a low-risk way to play for a pullback.
Take Profits Quickly: Don't get greedy. If you're up 40-50% on a trade, take the win and move on. Holding out for the last dollar in a volatile market is how you end up giving it all back.
Watch Volatility: High volatility means big moves are still possible. Keep an eye on the VIX and stay ready for reversals.
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Final Thoughts |
This isn't your grandpa's stock market. It's an algorithm-driven, liquidity-starved, volatility-fueled rollercoaster. |
If you're still out here trying to trade based on fundamentals or the latest news headline, you're already behind. |
The key to surviving—and thriving—in this market is to focus on price action, liquidity, and volatility. |
Forget the noise. Forget the "why." Start paying attention to the how. Because at the end of the day, it's not about being right. |
It's about staying in the game. Now go out there and crush it. |
To your success, |
Don Kaufman |
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