Are elections a good time to look for trading opportunities? This year, we saw how unpredictable the markets could be during periods of uncertainty under extreme circumstances. Election cycles are slightly different, though; they are predictable, and volatility spikes are ordinary, even expected. This week, the Topstep coaches give their best takes on what to expect in the days leading up to the final vote tallies in the U.S. general election.

Here’s What Our Coach’s Have To Say 

Funded Trader Shout-Out!

We’re shaking things up a bit this week. The Nasdaq has been the market of choice for our traders the last few months, but today we’re going back to the classics. Funded Trader Juan Carlos put on a clinic trading the E-Mini S&P 500 futures early in the week, including a fanciful $1,500 profit ahead of Tuesday’s close.

Did you know that Topstep funded traders have withdrawn more than $1.7 million from their Funded Accounts this year? Well, they have, and with help from more traders like Juan Carlos, we will push that number over $2 million before the end of 2020. 

There’s never a wrong time to get started on your path to becoming a professional trader. Here’s the best part, with Topstep, you don’t have to risk your own hard-earned money to get in on the action. Show us what you’ve got, and we’ll stake you with trading capital.

The Election

In one way or another, I think we were all expecting a certain level of precariousness heading into election day. The presidential race turned out to be much closer than many polls predicted. An army of attorneys representing both sides of the aisle is ready to contest initial results in several swing states. I’m getting the feeling that this could drag out for some time.

All things considered, are you surprised by the way the markets are reacting? For weeks we’ve heard a lot of talk about election day volatility, and while the VIX did spike above 40 in the days leading up to the election, it began to taper off again while the voting polls were still open. We didn’t get the same violent swings that we saw during the 2016 election, and that probably threw a lot of traders off.

Based solely on volume, it appeared that a fair amount of traders were sitting on the sidelines on election day, which is usually the right move for smaller, under-capitalized traders. Getting caught in the whipsaw of a series of wide swings is the bane of every day trader. But then the day after the election, breaking from the popular narrative, the VIX dipped below 29, and buyers came piling back in.

So, What’s the Play?

Is the market giving us a false reading to lure weak money back in, like leading sheep to the slaughter? Will volatility slowly start to rise again as we get closer to the vote tallies’ final results, or bear with me, can this election end up being a non-event? At this point, anything is seemingly possible, and the wackier the outcome, the more “on-brand” it will be for 2020.

There’s no shame in taking a step back to see how this whole thing turns out from a day trading perspective. If you’re looking for a longer-term opportunity, it doesn’t look like one has presented itself yet. Major stock market index futures have been trading sideways since August, and if you’re not playing the range, then you’re waiting for a breakout. So, adding to the list of questions above, what will hurt the most amount of traders?  If you can answer that question, you’re on the right track to figuring out your next move.

As traders, we need to calculate our risk. And while we want to take advantage of as many opportunities as possible, playing defense is just as big a part of the game as being active in the market. Don’t get fooled into thinking you’re missing out. Be patient and keep some powder dry for when the right opportunity presents itself to you.

Trade Well!