Market conditions vs trading techniques..

What a roller coaster ride last week was. Looks like 2018 is going to be very different from 2017. After a year of low volatility. We went from going straight up in January to taking the elevator down in the first week of February.

One important thing I learned throughout my trading career is the importance of market conditions. As we all have our own unique trading styles, there is not a one size fits all strategy. Each trading style has its own market conditions in which it works the best in. Trend following techniques require trending markets. Momentum trading techniques require momentum and follow through. Day traders needs volatility.

New traders often give up on winning techniques when they stop working. In reality it is not the technique that stopped working but the market conditions that changed.

So as you analyze your trading and your performance, it is crucial to note the types of markets that we are currently in.

For example January worked great for momentum and trend following techniques and buying on pullbacks to the trend lines. But the same style would have failed last week because you would have gotten stopped out multiple times due to the volatility of the market. If you are a day trader, last week could be an amazing week for you as the volatility was at its highest in years.

Unless you have been trading for a long time and have multiple styles of trading mastered. It is best to wait on the sidelines until the conditions improve for your trading style. So don’t quit on your trading style and think it stopped working. Study what happened last week and be prepared for the next time it happens.

Article written by @rxbroker (rxtrader2 on the stocktwits), who is an active trader on the Tradealike mobile app.

Follow him on the Tradealike app to get real time alert notifications.