In September and October of 2008 the young traders on our desk put up ridiculous numbers.  Their aggressive instincts were rewarded by the unusual level of volatility.  But then their aggressive instincts were severely punished in the months that followed.  They were slow to adapt to changing market conditions.  By December of 2008 it no longer made sense to make 200 trades per day and to aggressively hit bids and pay offers.

In the final week of August AIG was a market unto itself.  Our traders were rewarded for hitting bids and paying offers similarly to the fall of 2008.  Now that the volume and volatility has decreased in AIG they need to begin asking themselves what adjustments should they be making while trading this stock.  In no way am I suggesting that there still isn’t plenty of money to be made in AIG.  In fact it was our most profitable stock again today.  But there are signs that some adjustments will need to be made to continue to trade it profitably.

The most profitable trade in AIG today was right on the Open.  When it traded below 38 it moved down fairly quickly to around 36.  This is a tell tale sign of a stock that is less In Play.  Stocks that are very In Play will offer several great trading setups throughout the day.  And many good setups from the Open all the way until the Close.  Although there were several more chops to be made in AIG after the Open it wasn’t offering the kind of opportunity we saw when in two days it moved from 40 to 56 and then back down to 40 in two more days.

I will most likely trade AIG again tomorrow but I will use the information gathered today to be more selective with my trades.  I will look for my usual setups right on the Open but if I notice the volume is similarly light to today then I will look for other opportunities as well.  I will put in alerts at key levels that offer at least 50 cents of upside but I won’t be making momentum type scalp plays after 10:00AM.  I hope our traders do the same.

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