How would you know when the market has changed? Just by using your eyes looking at the charts? The human brain is superior in spotting patterns they say... Yet why do traders fail to see that markets change?
I think that when people start to win and make money they are very confident that things work that way. I can imagine that seeing all the things that you were giving for granted starting to fade must be a bit shocking. I guess that's where the selection comes in: some people are not able find the strength to recovery from the shock, and start panicking, and some people are able to wake up and find a new way. Steenberger's articles are quite interesting.
I think its just common sense. It begins with knowing what type of strategy your using and many don't know what category their strategy falls into. Therefore, they don't know or ignore what type of price action is suitable for their strategy. A simple example is if you know your using a trend following strategy... Why attempt to apply it in range bound price action? Traders that know their method is not suitable for a particular type of price action but continues trading in it... These are traders with an addiction to be in a trade. These are also the same type of traders that should be using different strategies due to their needs to be trading almost every trading day. The next step would be to determine (using the same example above) what type of price action the current market is in. There are many threads on this particular topic here at ET about how to determine if the market is trending, range bound, choppy et cetera. Also, I intentionally made a word above bold...ignore. What I meant via the word ignore is that many traders know the market has change simply via looking at their own trading results while at the same time not wanting to admit something has changed in the market. Many will try to tweak (change) the strategy instead of admitting what's really going on. Maybe profits are declining, profits are rising, profits are flat, less stressful trading, more stressful trading, less frustration, more frustration... All the above will tell you that markets has change in relationship to your strategy that your using. Further, your ability to tune into your own stats or day to day personal feelings about the markets will determine if you have the ability to know when markets has changed. For example, I visit several chat rooms and I already see an unusual number of messages about being frustrated with the price action of November by many different futures traders. Yet, I have not seen one single message by those same traders that its possible the market has changed. Guess what, November is a month of change (has been since the 80's) and your trading results this month should reflect such if your trading the Emini, Eurex or Euronext futures or any index related futures. Thus, depending upon what type of strategy your using, your profits should be above its normal pace or below its normal pace in comparison to prior months. Simply, our ability to see the change is completely different in our ability to react to the change. A changed market condition will always be reflected in our profit/loss results. Something else, we'll see similar like discussions like this next November. Mark
knowing the character of the market you trade, both in terms of its general nature, and its specific nature on the particular day as it is developing is key. i trade index futures. i know, for instance, that on average only 4-6 days a month will be "trend days' or in "vertical development" to us MP parlance. personally, i far prefer trading what many "trend traders" would refer to as choppy markets, but that's why i chose index futures, cause their movements suit my trading style. but being able to read market internals is a big part of how i construct my trading. obviously, if the market is vertically developing with strong institutional participation, then "fade plays' which make up the vast majority of my trade volume, are NOT the types of setups to employ. there are all sorts of methods to use to recognize character of the market as developing intraday, with the use of market internals, benchmarks, and the markets performance around key reference areas being of special importance to me
well yes. key reference areas are areas that, for one reason or another MAY act as support or resistance, or should act so. they could be anything from market profile reference areas to globex hi/lows, etc. etc. if you see price BLOW THROUGH a key reference area like it was not even there, that is a HUGE flag that a vertical development day may be in place. if u know where institutions have been capping prices, for example, and those levels don't see capping the next time through, that should make u go ... hmmmmmmmmm