{"id":25602,"date":"2013-03-29T08:24:44","date_gmt":"2013-03-29T12:24:44","guid":{"rendered":"http:\/\/www.smbtraining.com\/blog\/?p=25602"},"modified":"2021-05-07T11:01:20","modified_gmt":"2021-05-07T15:01:20","slug":"what-do-you-do-when-your-strategies-stop-working","status":"publish","type":"post","link":"https:\/\/www.smbtraining.com\/blog\/what-do-you-do-when-your-strategies-stop-working","title":{"rendered":"What do you do when your strategies stop working?"},"content":{"rendered":"

Hello Mike,<\/p>\n

I have an interesting question for you.\u00a0 Its about the life cycle of a trade set up.\u00a0 I’ve realized that like businesses trading\u00a0setups are also cyclical.\u00a0 There will be periods where the set up produces an edge, and there will be periods when the set up is not producing an edge. Does this mean the setup no longer works and it has become extinct like a dinosaur? or Does this mean the market conditions are currently not favorable for this set up and it would be best to revisit this set up at a later date?\u00a0 What does one do when a set up has stopped performing?<\/p>\n

I’ve also heard the term “There is always a bull market somewhere”.\u00a0 Which may indicate that maybe rather than changing the setup, finding another stock\/commodity or instrument where your setup can perform for you may be the right way to go.<\/p>\n

What do you suggest?<\/p>\n

@mikebellafiore<\/strong><\/p>\n

When we develop patterns that make the most sense to us, and place them in our PlayBook<\/a>, we first start with the Big Picture. \u00a0Too many traders undervalue market structure before placing a trade. \u00a0I was in CT yesterday with 3 of our traders visiting a top US hedge fund, where a market veteran implored our traders to grasp the importance of a market structure’s effect on all trades. \u00a0A bullish flag pattern to them is traded the same whether we are in a range bound market, bull market or bear market. \u00a0This makes no sense. \u00a0They trade a bullish flag pattern whether the stock is In Play or not. \u00a0This makes no sense. \u00a0When you build your PlayBook you must develop setups that will work factoring in The Big Picture.<\/p>\n

So let’s start with momentum trading as this is what most of our are. \u00a0We may call ourselves long term players or mico players but most of us are momentum trend traders. \u00a0Short term momo trading worked very well in 07 and 08 because of the increased\u00a0volatility\u00a0in the market. \u00a0 Today we sit in a low vol environment. \u00a0Add to this HFTs have developed strategies against ours. \u00a0If you do exactly what worked very well in 07\/08 you will see your results change from quite positive to\u00a0decidedly\u00a0negative. \u00a0 This will not be a matter of you trading poorly it will be that your\u00a0strategy\u00a0needs\u00a0tweaking or shelving until a different market environment.<\/p>\n

Does this mean you cannot momo trade in this environment? \u00a0Of course not. \u00a0It means you must be more selective with your momo trades because of the new market structure and environment. \u00a0So the momo strategy will still work but only in more selective setups. If a sector gets very hot a momo strategy will still work well. \u00a0If a stock has real order flow a momo strategy will still work.<\/p>\n

In this #newnormal as @sspencer_smb<\/a> has tweeted extensively about, we recommend expanding your trading horizon and making sure there is a clear catalyst behind your trades.<\/p>\n

I heard a trader of late chirping that some traders get hot and then they get cold. \u00a0And saying this as if this is just the way it is in trading. \u00a0Well it might be. \u00a0But only if those traders undervalue market structure, or as we say The Big Picture. \u00a0And do not adjust their trading setups for the market and\/or dip into other setups that will work best in a new market.<\/p>\n

Gr8 question. \u00a0 I tackle this issue in more detail in The PlayBook<\/em><\/a>. \u00a0I hope that helped.<\/p>\n

Tomorrow you can be better than today!<\/p>\n

Mike Bellafiore<\/p>\n

The PlayBook<\/a><\/em><\/p>\n

One Good Trade<\/a><\/em><\/p>\n

\"\"<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

Hello Mike, I have an interesting question for you.\u00a0 Its about the life cycle of a trade set up.\u00a0 I’ve realized that like businesses trading\u00a0setups are also cyclical.\u00a0 There will be periods where the set up produces an edge, and there will be periods when the set up is not producing an edge. Does this mean the setup no longer … Read More<\/a><\/p>\n","protected":false},"author":144,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[10],"tags":[2444,2449,4703,2448,2451,4706,4707,1718,653,2445,1989,4712,4690,1888,207],"class_list":["post-25602","post","type-post","status-publish","format-standard","hentry","category-mike-bellafiore-bellas-blogs","tag-daytrading","tag-how-to-be-a-day-trader","tag-learn-trading","tag-prop-trade","tag-stock-market-course","tag-stock-trading-education","tag-stock-training","tag-the-playbook","tag-trader-training","tag-trading-careers","tag-trading-course","tag-trading-courses","tag-trading-education","tag-trading-school","tag-trading-stocks","no-post-thumbnail"],"yoast_head":"\nWhat do you do when your strategies stop working? | SMB Training<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.smbtraining.com\/blog\/what-do-you-do-when-your-strategies-stop-working\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"What do you do when your strategies stop working? | SMB Training\" \/>\n<meta property=\"og:description\" content=\"Hello Mike, I have an interesting question for you.\u00a0 Its about the life cycle of a trade set up.\u00a0 I’ve realized that like businesses trading\u00a0setups are also cyclical.\u00a0 There will be periods where the set up produces an edge, and there will be periods when the set up is not producing an edge. 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