How to adapt with market changes

Hey Market Pilots,

Every successful trader has a process or method that allows them to take money out of the market in a fairly consistent way, and while that method may be excellent, it probably won’t work in every market environment. When the market changes, it’s important to remember that and subsequently assess the effectiveness of your strategy with the current market. If it isn’t effective, you can wait and ride it out: being patient for just the right opportunities which may be significantly fewer and farther between… Or alternatively, you can figure out the new characteristics of the market, adapt, and employ the new strategy on the fly.

But this is easier said than done, isn’t it? 

To make it less difficult, over the years of trading a variety of market conditions, I have built a handy folder of different trade configurations. This is a book of templates that can be referenced when variables change to see if any previously discovered methods line up well in the current market. Usually, the market changes as a result of changes within the real world. Because of this, I like to record answers to questions such as, “What are the current events that are having an effect on the market’s behavior and causing it to change a bit? Is this affecting only a certain sector or multiple sectors? Is it good news or bad news? Is it during a bull market or a bear market…” You get the idea. And while these are just some of the facets a trader needs to assess in order to figure out what is changing and how to adapt, they’re still a great jumping-off point.

Observation has always been, for me, the key to learning the new ways of the market. Take a step back and just watch for a while to see what is happening. For example, maybe you are used to buying breakouts but that doesn’t work as well nowadays… However, you have seen that buying dips and selling at previous highs has been fairly consistent. If that is the case, then write up some notes, rules, or guidelines based on your observations. Take that new method and go apply it to some recent moves in tickers you follow and see how well it holds up. In doing so, you’ll likely find some nuances about the method you weren’t aware of before which is another great discovery to list in your trading journal.

Having a reference book, or trading journal, like the one I described above, can be extremely helpful as you grow in your trading career not only because it allows you to see how your style and market view has changed over the years but more importantly, it also shows you what was behind the changes. Seasoned traders often talk about keeping a journal, so it’s no secret that journaling can be helpful as you develop your skills. But to me, keeping track of changes is an integral part of that trading journal routine and can make all the difference when it comes time to adapt. Do you keep a trading journal? What are some of the ways you use journaling to be successful? Feel free to share in the comments below. 

Over and Out,

Your Profit Pilot


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