Constant trading change
One of the biggest causes of stress for futures and commodity traders is not adapting to changing market conditions. Many traders get used to the market behaving a certain way and learn how to trade specific patterns that repeat during these periods of time. The market then changes and the trader encounters problems adjusting to the different in the way the market is trading.
Often times after markets exhibit strong trends for few weeks to months, the market enters a choppy sideways range bound trading range. During this period of time many traders successfully trade reversal patterns with uncanny degree of accuracy, because the market is consistently trading in a tight trading range. The trader has a good degree of success and develops strong confidence in his trading abilities. Then the market begins a trending phase and the trader gives back everything he lost trading reversal patterns and gets discouraged about his abilities as a trader.
Markets are living entities in constant change and the key to trading survival is to learn to recognize change and adapt. Traders who are rigid in their thinking and do not change when the market begins exhibiting different characteristics, will undoubtedly suffer the consequences of being out of tune with the market and will make things even worse by forcing their ideas and projecting on the market what they believe the market should be doing instead of taking clues and adjusting their trading style to work in the environment that the market is providing at the present time. Often time’s traders find it difficult to change their approach because their old approach to trading has worked well for extended periods of time.
This behavior often occurs in different business industries and day trading is not immune from it. To give you an example, I have a good friend who is in the real estate business. He began his career in the early 2000 when the real estate market began a bull run. Over the next six years he became very successful and developed a method of getting new clients by making 50 calls each day 7 days per week to different people he knew.
This was his strategy for getting clients, he was diligent in his phone calls and his method worked. Forwarding things to late 2006, my friend had not closed a single escrow in several months, he continued calling 50 people per day but the results were completely different, no one was interested in buying homes. My friend incorrectly concluded that he was doing something wrong and that he was no longer a good real estate broker.