To improve your profits develop Situational Awareness (SA) skills
What is Situational Awareness (SA)
SA or Situational Awareness is aviation term. Pilots and airlines use it all the time. The pilots are trained in SA.
SA improves safety and avoids accident. There is daily SA briefings for pilots in most good airlines.
The objective of SA is to be constantly aware of your surrounding, weather , equipment, landing conditions and so on to change your tactics when warranted.
I first heard the term when I was heading marketing function in packages delivery company (Fedex franchise in India) which used to operate cargo plane.
One day early morning one of the plane overshot a runway and got stuck in mud while landing and it so happened that live television cameras that were around for some other function at the airport caught the action live.
So early morning this was a breaking news on all news channel. I was the marketing and PR contact for the company so all kinds of journalist started calling me asking for reaction.
I called the pilot and asked him what happened he said he lost SA (situational awareness). I had never heard of SA so I asked him what the f.... is SA. So he explained it to me.
The US Air Force coined the term SA during the Vietnam war.
In the long and frustrating war lot of pilots were losing SA and doing stupid things and so they established the SA training program for all pilots.
Situational Awareness. An all-encompassing term for keeping track of what’s happening when flying.
SA involves knowing what your airplane is doing relative to its envelope, where your adversary is and what he’s up to, where the ground is, the status of enemy threats on the ground, and hundreds of other variables.
Loss of situational awareness is often cited as a contributing factor to many military-aviation mishaps.
If you have seen the movie Topgun it is basically based on the training methodology developed during Vietnam war.
United States Navy Strike Fighter Tactics Instructor program (SFTI program), more popularly known as TOPGUN was first program designed to emphasize SA for fighter pilot.
In modern plane there is lot of technology to assist pilots in SA and from time to time you will see the Airforce will award contracts for SA technology development.
What is situational awareness in stock markey
The key role of a trader is to operate successfully in a complex and ever changing market environment by making appropriate decisions and taking effective action.
This includes not only responding to opportunities in the market but also to proactively anticipate markets next move.
The Psychological or technical name for a skill like that is called Situational awareness (SA). (SA) refers to all the situation-specific information and inferences represented in a persons mind which he or she uses to make such decisions.
Or in simple words SA is knowing what is going on so you can figure out what to do . It is what you need to know not to be surprised
SA consists of whatever answers one currently has in mind to such questions as:
What is happening in the market?
Why is it happening?
What will happen next?
What does it mean in terms of my trading objectives?
What can I do about it?
Is it a good environment for breakouts
Is it time to put more size or reduce size
Is it time to proactively close position or give them more room.
Is it time to look for reversal setups
You need to develop SA before a situation arrives.
That is why day in and day out pilots are drilled on SA.
You can not ask for exit or stop rules when in emergency.
SA can only be developed by everyday consciously working on it.
You need a mental plan for all situations.
SA is one of the most critical skill you need to develop if you want to be successful in trading.
Lack of SA skills often lead to disaster in trading . It leads to late entries or buying aggressively just before major reversal or panicking near bottoms.
Setup+SA= consistent profit
Write your own ACTIONABLE Situational Awareness Daily
Make a habit of writing your own SA everyday. It should be actionable SA like say be aggressive on long side, stay out of market till reversal happen, or anticipate a turn, or tighten stop on existing position, or sell in to strength, or fade this move.
Situational Awareness is very critical for swing traders and position traders. By definition day traders have to trade everyday so it does no matter to them.
Situational Awareness will help you avoid risky periods where your setup is not likely to work.
It will help you identify periods where your setup is likely to do very well and then you can step on gas pedal.
SA will allow you to adjust your tactics like say letting trade run if your SA tells you this is start of a new bull market. Or take profit early if the trend becomes weak or likely to fade.
While some stocks will work independent of the market direction, majority are influenced by the market. Especially at turning points in market this is important.
If you want to be in this game for long term and keep your profits develop SA skills by practicing daily.
You will see that all successful traders have some sort of market timing model which helps them avoid some periods in markets.
Don't focus on what others think.
Develop a logical framework for your own SA. My framework is driven by market breadth trends, but you can develop your own framework based on market structure.
Do your own analysis and write just 4 to 5 lines everyday.
See if market is acting as per your SA. Refine and refine your process over days or months till you are very confident in the game.
In few months you will develop confidence in your own judgement and SA will become integral part of your daily market thinking.
Above all SA will help you to make and keep money.