The trader that changes survives. Stubborn traders do not make it very long in the markets. The first time they are wrong in a big trade and refuse to cut their losses they are ruined. A perma-bull in a bear market loses money as does a perma-bear in a bull market. The market is the boss and we must follow it. Egos are a disaster in trading, the ability to stop a loss is crucial. The ability to admit you are wrong when you lose money and then even reverse and go the other way is crucial for long term survival.
In violent wind storms the flexible trees sway with the wind and survive, the brittle and inflexible are broken.
What is one of the most powerful forces on earth? Water for its flexibility to be all things and to flow around any surroundings. Water does not try to beat the river it becomes the river. Thrive to flow with the markets action not against it. Let the price action on the chart be your indicator and the moving averages your gurus.
- When the market goes from bull to bear, or from an uptrend to a down trend you must change from going long to going to cash or selling short.
- When a market recovers from a bear market to an uptrend over taking the 200 day moving average you must go from bearish or neutral to long.
- New bull markets most of the time have new leaders you can’t just play the same ones from the last up trend.
- When you make a trade and it goes against you, then you were wrong. When your stop is hit you must change your position and get out.
- When you have a strong opinion about a trade but it goes the opposite of what you believe day after day you must change your mind, you were wrong.
- When a trade does not go the way you expected in the time frame you had planned you have to take a time stop and change to something that is moving.
- Each day you must change and grow as a trader and improve on your skills through continuous learning.
- While the market will change the principles of winning through risk management, correct trader psychology, and playing the probabilities will stay the same.
- The market rotates and different market capitalizations come into favor and out of favor, follow the money.
- Different sectors rotate in and out of favor based on the cash flow of earnings, follow the capital.