As traders, it is our job to adapt to changing markets. No strategy or system works forever. And while there are certain trading fundamentals that will always be relevant (i.e., discipline, patience, proper preparation), we always to need to be cultivating our edge and looking for new ways to make money. Below is a quick rundown of three shifts I’m making in my general trading approach as I adapt to the current market:
1. Following more stocks:
I know this hasn’t been the easiest market to trade, but like in any market, opportunities are abound if you are well prepared and focus your energy in the right places. For the past several months, every day, several of the 50+ stocks I usually follow present at least one good trading opportunity, and in order to capitalize on them, I need to be prepared when trading off of information I have collected in previous days/weeks. This is a bit of a diversion from how I would previously trade, where I might make dozens of trades in one stock or ETF, trying to milk it for all it was worth. Spreads are tighter, and moves are smaller, and I think it is paying off to try to be involved in several stocks during any given day as opposed to focusing on a single stock. The exception to this is if a stock is displaying exploding volatility on a major news story. Usually those plays will demand all of my attention.
2. Looking for fewer setups/trades in each stock:
In each of the stocks I follow, I try to limit my trading to just one or two levels/setups to trade each day. Whereas in a higher volatility market, it may be more profitable to scalp all day and make dozens of trades in one single stock (as you might expect several large moves or reversals), I’m finding most stocks I follow will have only one or two good moves a day (if at all), and I need to be much pickier about the prices and setups I’m looking for.
3. Longer holding periods for my trades:
Yeah, it’s nice to catch two points in 30 seconds, flip the position and catch a point the other way, but it’s just not happening like that right now. Stocks are moving less intra-day, and they are taking a longer time to make their moves, so the average holding periods for my trades has increased drastically. Sometimes in order to do this I have to filter out a lot of the noise that occurs in a stock as it trends its way in a certain direction. If I’m in from a good price, and the trade is working out, why mess with it as it zig-zags toward my target.
This is just a very basic rundown of some of the adjustments I’m attempting to make in my trading. So far I believe they are working pretty well. As a professional trader, I’m always working on my skills, and looking for new edges and opportunities in the market. I’m interested to hear from other traders out there about some of the adjustments they have made in the past few months or are currently making. Please feel free to leave a comment, and best of luck with your trading.