I have a question for you? Have you ever been wondering if your strategy will ever work again feeling you should start all over again?
We all have been there. Once in a while there comes a period when everything we touch turns gold. All trades we enter are doing exactly what we are expecting they would do. They go up in straight lines hitting our targets very quickly. As we are going through this period our brain is trying to rewire telling us: “from now on, it is going to be like that”, or “you have mastered the universe, you are a new trading kingpin”. And one day there it comes: a wake up call! Loss and another one, and another one. Old cliché so no need to carry one. The point I want to make is that these times will come and you need to do few things:
– keep your losses to minimum (by minimum I mean lowering the size, exiting agressively, truly staying in trades only when you are correct)
– identify what has changed!
So what has chnaged? I really like the quote from Mike Bellafiore: ” you are only as good as the stocks you are trading”. There are months when you can simply make 15-20% return on your portfolio. And other months when you can easily erase these profits if you do not recognize how the market changed. Now ask yourself! When does your strategy works the best? How do you adjust to ever changing market? How do I find out if my strategy works and when I can use my plays?With me, it all starts with macro analysis. It sounds fancy but it is nothing else than answering simple question: are we ranging or trending?
Once I got the answer I ask myself. Where are the next supply/demand zones and on which side is a higher probability of continuation? If for example I see higher lows creation and pressure coming over and over towards a resistance, I can identify that the bulls are more in charge and spot the next potential area of higher low. So by now I think I know (of course i am never sure) what type of structure I am trading and which side has a higher probability for continuation. After that it is all about risk and reward.
Ok back to my initial question. Have you ever been wondering if your strategy will ever work again feeling you should start all over again? If you have answered yes, the text above holds possibly some answers. Think about it.