Being in tune with market phase is important

One of the critical skills traders need to develop is to align their trading with market phase. 

Being aware of situation and likely scenario helps you focus on right kind of setups and control risk. 

On a day to day basis if you can anticipate the market moves then you can decide whether bullish setups or bearish setups are likely to work. You can within that decide whether buying breakouts is going to work or buying pullbacks is going to work. 

For example in current market conditions buying a breakout on momentum stock would have lead to frustration and getting hit with stops, but buying an overextended stock for a bounce or stock near low for a bounce was winning strategy. 

BMA is an example of Bottom Bounce kind of setups that worked in last one week.

Situational Awareness skills will help you take your trading game to next level. If you want to make millions trading develop a habit of writing Actionable Situational Awareness daily.

Actionable Situational Awareness will have actionable actions like "focus on Bottoming setups because market is overextended to bearish side", or "Focus on fading stocks that bounced in last 5 to 7 days as overall market is likely to fade the bounce", " Tighten stops on existing positions because market is vulnerable to correction" or "sell into strength today" and o on and on. 

Making your Situational Awareness or market analysis "actionable" is key. Just analysing things and not working on them is not going to help much. 

Once you develop Situational awareness you will be able to avoid risky periods in market by being proactive. Look around so many traders this year lost money or gave up good gains because they did not do good job of assessing the situation once market started to turn. 

Situational Awareness will help you identify periods where your setup is likely to work well and then in that period you can do more trades or step on gas pedal and do more size. 

Situational Awareness will help you adjust your tactics .  This can be for example letting your swing trade run longer because it is start of a new bull move in market and that is likely to last 12 to 18 months or quickly taking profit because market is extended and vulnerable to correction . Having this kind of dynamic approach helps you to be nimble and avoid market traps.

If you want to be in the trading game for long tem and make millions then work on developing your Situational Awareness skills. 

In order to develop this key Situational Awareness skill you need to have some underlying market structure basis to base  your assessment on.  I develop my Situational Awareness daily based on underlying trends in breadth, daily analysis of large moves in markets and historical analysis of moves.

Do your own Situational Analysis for your kind of trading daily  and write just 4 to 5 lines everyday.

See if market is acting as per your Situational Analysis. Refine and refine your process over days or months till you are very confident in your own Situational Analysis skills

In few months you will develop confidence in your own judgement and Situational Awareness  will become integral part of your daily market thinking.

When you do that successfully it  will help you to make and keep money.

This Is the kind of higher order skill you need to develop if you are struggling trader or not satisfied with your results. There is more to trading than just picking stocks.

What is your Situational Awareness  for today?


larsdoc said...

Extremely helpful post! Thank you for sharing all your knowledge. In this current bear market, would you differentiate between buying oversold RW stocks or pullbacks in RS stocks?

Pradeep Bonde said...

Oversold bounces are working better.