It would be very convenient to have a day trading system that works under all conceivable conditions without fail. Whether the market is consolidating, trending up or trending down, the ideal system would generate profit regardless of prevailing market conditions. Unfortunately, no system adequately handles the changing market conditions that may arise over the course of your daily trading session. Obviously, this causes problems for both novice and experienced traders.
One of the very real problems day traders experiences is adjusting their trading style to the changing personality of the futures market. The best metaphor I can conjure up is fishing. To say the least, fishing is a fickle hobby to engage in. There are days when fish attack a certain type of lure, but the next day the exact lure will prove to be of little value. Some days your choice of lures may change throughout the day. The point is simple, what works one time of day may not work later in the day, or even the next. In fishing, you need to be flexible and adjust your fishing style and bait to meet ever-changing weather and water conditions.
It’s really not that different when trading. On certain days, a setup will consistently generate profit. On the other hand, the next day, the same configuration will produce nothing but losses. I have no rational explanation for this phenomenon other than explaining that the market is constantly changing and evolving. Your ability to determine which trades will be profitable on any given day is a critical skill.
For example, most days the market tends to respect support and resistance levels. Time and time again, price action will go back and forth to previous levels of support and resistance and change direction. Of course, this makes trading very accurate for those who are familiar with trading support and resistance. However, the next day, the market may not pay attention to support and resistance and break through your support and resistance level as if they did not exist.
What does this mean for you as a trader?
It is essential that you have a number of trades in your trading arsenal and approach the next trading opportunity with a different setup. In my experience, after a few test trades, I can usually find the trade setup that is effective for that day. On the other hand, many traders work with their preset trading style and sustain substantial losses. It is imperative that you determine the mood and tenor of the market so that you can match the appropriate trades to the particular trading session that day.
This requires some experience and experimentation to perfect. However, it is imperative to adjust your trading style within the general framework of your trading methodology to meet changing market conditions. Staying with a trade that worked yesterday but doesn’t work today will result in some losses. In my own trading, we use a number of prices action-based setups, indicators and oscillators. We have yet to find a day when one of these indicators does not establish a profitable trade. The secret is to find which settings and/or configuration settings will be most effective.
We would say this was a warning; it is very difficult to trade in established markets and we have yet to find a truly effective methodology for making profits in markets that trade in a very tight range. It is our recommendation that you avoid trading markets that are range bound as they are generally difficult and unprofitable to trade.