What happened yesterday afternoon will be the subject of news stories, speculation, and yet more congressional hearings for quite a while. It was nothing less than heart stopping. However, let?s look at three simple insight from yesterday that can help us with our own individual trading today.

First, this morning CNBC interviewed Kevin Ferry from the CME. As the market crashed yesterday, his group went flat. They didn?t know or understand what was happening and therefore they took their risk to zero. This is even more confirmation, that not trading is a valid intraday trading decision. Everyone who trades should remember that waiting for the right entry may keep you out of crisis.

Second, he accurately pointed out in his interview that during that heart stopping death spiral there was no liquidity. Liquidity is the ability to sell easily, you have plenty of buyers and sellers at each price. Fast violent movement, like yesterday, is not liquid trade. There may be plenty of volume associated with the fall, but no liquidity. As small futures traders we want to trade when we have good liquidity.

Third, I noticed today that several brokerage houses have increased there intraday margins on futures trading. One went from $400.00 per contract to $1,000 per contract. Clearly, they had some issues with liquidity and order fill yesterday. I feel that this change could and should become mandatory. In the long run it would force new and smaller traders into trading fewer contracts which would be good for most individuals and force them into better risk management. For prudent smaller traders take fewer lots in times of higher volatility.

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