From Pain To Gain by Dan Zanger
Most traders fail to adjust their trading strategy to match the current market. Here are five ways to identify when a trending market changes direction.
Let’s face it: Trading is no piece of cake. The average trader melts his or her account five times before they finally succeed. But how many would-be traders ever make it that far?
There are a number of pitfalls along the way to success, but one big mistake that many new and even some experienced traders make is not adjusting their trading strategy to match the current market. For example, failing to recognize that a bull has given way to a bear and continuing to buy the dips will zero your account balance quicker than a bad weekend in Vegas. While some markets deplete your account in big chunks, there are other, less obvious situations that can be likened to the ancient saying “death by a thousand cuts.” Anyone who has tried to use a trend strategy in a trading range market knows what that’s like. Range-bound markets are extremely choppy, and it’s that choppiness that serves momentum and swing traders...