Moving Targets

 One thing that many people fail to realize, but that actually comes quite natural to others, is that successful trading is all about adaptation to moving targets. But the shifting landscape in opportunities results in a chaotic situation for anyone out of sync or tune with the markets. Except it's not really the markets that people are out of sync with; it's usually themselves. People are left chasing opportunities instead of allowing opportunities come to them.

One market condition may be a breeze for one type of trader, while hell on earth for another. As an example, a steadily upward trending market after a series of up-days may be the sweet spot for a trend follower whose mentality it is to squeeze the most out of any sustainable rally, while a gut-wrenching experience for the short-seller who is looking for a sensible top. Often what happens is that the short-seller will rely upon past experiences and go "all-in" when the top must be in place, only to see the rally extend beyond belief (along with the drawdown in his account). 

Here, the short-seller is not totally out of sync with the markets. He sees it going up, and it ready to pounce once the top appears to be in, which might very well be around the corner. The problem is that he is out of sync with his need to find that top vs. waiting for the evidence to become clear. So one might be 95% correct in both identifying the right security and its eventual outcome of a mega down-day (we've seen this numerous times in TSLA lately), but completely wrong by imposing one's will on the market. 

This is where developing a consistent trading mindset will trump short-term changes in what's "normal." If it is your intent to say find opportunities of high-volatility stocks with large daily % increases, filtering opportunities based on that criteria will be much more powerful than say reacting to headlines that show how everyone is pouring into AMZN these days, or that gold futures have been unstoppable. While you think you are "adapting" to the new normal of these other types of securities showing promise, and attempt to trade them with limited initial success, in all likelihood a great opportunity in your high-volatility sector would have passed you by. 

Here's a slight twist: if it's your trading mindset to actually scope out opportunities by popularity, you may not care whether it's Nasdaq futures or energy penny stocks. Your specialty is seeking out hot plays and leveraging crowd dynamics on these days/periods. So being out of sync with yourself, and instead say being drawn to the "hidden gem" touted by a newsletter (that is about to explode based on undiscovered potential by the rest of the market) may leave you in a situation where nothing is happening. When seeing the popular securities unfold, it only leads to more frustration and bad decision-making. 

So the lesson here is that the best way to adapt to moving targets is to set your targets, work hard to refine them, work equally as hard to be at peace with them, and finally allow for market conditions to meet them.