010: Perry Kaufman discusses applications of market noise, mitigating price shocks, volatility and using the Information Ratio to monitor strategy performance.
Better System Trader
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How to Boost Your Profits When the Volatility Is Low
It is important, if you're trading futures, for example, or the s and p, to leverage up when the volatility is low. The professional managers have what they call the target volatility somewhere between 12 and 16%. When the volatility falls down under 12 %, say to ten or eight %, they gear up by raising the size of their position. So there's a lot of money to be made in these lower than average a volatility periods. On the other side, as i mention, when the volatility was very high, you're much better getting out.
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