A Talk with Former Morgan Stanley Man Tom Meyer
Wednesday, 20 January 2021
By James Woodburn
[1 min read]
Looking back on the stock market action in 2020, you know that volatility was high due to the pressures of the coronavirus on the economies of the world.
We know there were sharp moves to the downside…and then to the upside.
Here are a couple of questions for you.
How much did volatility change? And how did this affect your investing and trading?
Most people wouldn’t be able to answer the first question and would just guess on the second question.
But this is one of the powerful pieces of information that former Morgan Stanley man Tom Meyer brings to our team.
Tom’s the editor of Algo Trend Trader, an advisory I launched with him in early 2019. In it, measuring volatility is the cornerstone of his strategy for investing.
He does it by calculating the expected move for each of the tickers his system tracks.
Understanding the expected move is a great way to see changes in volatility for the stocks or markets you’re looking at.
When the expected move expands, it means that volatility is increasing…and when the expected move contracts, it means that volatility is decreasing.
This is a great way to visualise the dynamic nature of volatility.
In 2020, volatility was double that of the year before. While that freaked out many investors, it didn’t Tom. That’s because he measures it. And when you measure it, you know what to do with your trades.
Anyway, we had a fascinating conversation about this yesterday afternoon.
After a wild 2020, he sees volatility contracting in 2021. That’s not a prediction for market direction. But it will make you a smarter investor and understand what’s at play better. He also runs his algorithm over Bitcoin [BTC] too.
Check it out by clicking the screenshot below:
On Friday, I’ll be talking to Nick Hubble, editor of Jim Rickards’ Strategic Intelligence Australia.