At the beginning of the day, when I look at a chart, I am open to the idea the market can go in any direction. I can have the right mindset, the right strategy in place, yet the market can still go against me. Such losses, which can be considerable, are a part of day trading. It’s important to be honest with oneself about the risks and rewards for a speculative activity such as futures trading. Similarly, a series of large wins can produce a false sense of confidence. For example, a strong trend may tell you price will continue to head in one direction; that you can do no wrong. You may be tempted to buy the market multiple times, perhaps at increasing amounts. This is yet another way strong market direction can deceive traders. Is there anything else, we as traders, need to look for?
Yes, in fact, market conditions that never escape a range of a couple points or ticks can be equally, if not more, devastating. Imagine the following scenario. The market just opened. The ATR is high. You have a couple of signals telling you the market is about to go short. You confidently place an order to sell. Price begins to drop. Ten minutes later, price has continued its approach towards the profit target. Price is a tick away. Suddenly, the market begins to retrace. The candle closes at your entry. It’s a breakeven trade. Frustrated, you watch the next hour of market activity. Price never goes beyond three points in either direction. Yes, you’re stuck in a range. And despite high volatility (a high Average True Range), that market has deceived you. These are choppy conditions – some of the most difficult to trade.
What can be done? Well, you had two confirming signals. If you’ve been successful in the past with those methods, there’s no guarantee for future results. However, you need to look at the bigger picture. Is one day of trading going to decide your overall success and career as a trader? If so, you should look for regular employment. With trading, it’s about overall performance – looking at months of activity to decide how effective or ineffective a strategy is. It’s okay to lose a battle. It’s more important to win the war. And that’s exactly what John Paul is saying in this most recent webinar. Watch the recording and see how to handle tricky market conditions.