Mar 27, 2017

Momentum Day Traders

"The more momentum type traders are going way. The guys buying and selling very quickly, the black boxes have taken over that area. If you are a trader trying that, start changing your style into a little bit of a longer term outlook. It could even be a 2-hour outlook versus buying and selling quickly in 3 minutes."

Sean Hendelman, CEO of T3 Companies

Changing Market Conditions 

As an old adage says, “There’s no such thing as the goose that lays the golden egg forever.” Market conditions do change. One of the real skills for a systematic trader is to understand when he or she needs to change a trading system or its parameters, adapting it—or even when to abandon it altogether and develop a new one. 

Traders work very hard to find a trading edge that works, and they’ll play it out until it stops working. But they must be prepared for, and even expect, the market to change, and they must know that this unavoidable change may reduce or eliminate their trading edge. That is why it’s so important to look for new ideas all the time and to always be testing new systems and patterns—doing so means you’ll have a backlog of trading edges to work with if or when your current one loses efficiency or stops working. 

One strategy I find useful is to compare the short-run metrics to the long-run metrics to measure a system’s health in terms of profitability. This is one of my favorite trading practices. I am always comparing the short-term performance, distribution of trades, and risk metrics of my trading systems to their long-term metrics. I want them to be as constant as possible, because in trading, you do not need a large edge to run a successful trading business—you need, instead, to have a consistent edge. 

I like to compare the year-to-date metrics (average tick per trade, total dollar win) with the metrics over the last three months and over the last month. What I do is look for evidence of significant deterioration in a particular system. If a system deteriorates too much, I will stop using it until its performance is back in line with its historical data—that is, if it ever recovers those metrics, because often a system’s deterioration is not temporary. 

Be aware that the market may change from time to time and that you may need to adjust your trading edge accordingly or even develop a new one. Charles Darwin said it’s not the strongest or the most intelligent who survive; it’s those who can best manage change. This is very relevant for trading, as the need to always be in sync with what the market is doing implies an openness to change.

You will follow practical steps and acquire the essential skills a successful trader must have in order to consistently win, and you'll also learn:

- how to develop a trading system
- how to utilize the best trading techniques within a trading methodology
- how to think about the psychological aspects of trading and the markets
- how vital it is to treat trading like a business

As you master this breakthrough program, you'll build yourself a distinctive trading signature.

"It took me five years to become a profitable trader and almost another five years to become extremely consistent. If I had come across the right trading material and concepts earlier, I’m sure the learning curve would have been far shorter. This practical book will give you the materials and concepts I wish I’d had early in my career." - Henrique M. Simões

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