No one setup or pattern works 100% of the time.
Think about it…
A stock can soar to new highs in one month because of a specific catalyst …and then get pummeled the following month because the trend has changed.
Example: AMC Entertainment Holdings Inc. (NYSE: AMC)…
A different stock can languish for weeks (or months) … then one piece of positive news sends it surging to new highs in a single trading day.
Example: Twitter Inc. (NASDAQ: TWTR)…
If there is one thing I’ve discovered in my 10+ years of trading, it’s this…
If you want to win in the stock market, you must be ready to adjust your strategy WHENEVER necessary.
In other words, you must be nimble. Be ready to shift your setups, your patterns — and most of all, your mindset — any time the market changes pace.
Trust me, this is a lot easier said than done.
I’m probably one of the more stubborn traders you’ll come across. And sometimes it causes me to drop money in unnecessary trades because I refuse to accept the changing market conditions.
So how do I keep my stubbornness in check? And most importantly, what do I do when the market conditions suddenly change?
Today I’ll explain to you how to get through any situation.
Pay close attention because if you don’t learn how to adapt in this game … you’ll blow up your account.
Develop Your Playbook
Every competent trader should have a diverse bag of tricks they can pull from during different market conditions — this is your trading playbook.
I’ve mentioned before that I’m a huge San Antonio Spurs fan. The Spurs don’t have one catch-all play they run on every team. They have a deep and fine-tuned playbook of strategies to employ depending on the opponent they’re facing.
I try to approach my trading like a great sports team. I’ve spent years developing a playbook that works for me.
Now, depending on what’s going on in the stock market, I have a variety of patterns and setups that I can trade.
Sure, I still have my absolute favorite strategy (buying puts on overextended momentum stocks with a ton of volatility)…
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But if the market calls for it, I’ve been known to flip sides and buy calls — occasionally on the stocks I’ve previously shorted.
If you’re still developing your playbook, take your time. Don’t rush it. When I was building out my bag of tricks, I pulled inspiration from great traders that I admire…
If I hadn’t joined Tim Sykes’ Trading Challenge, I’d probably still be a clueless newbie with no playbook. Sykes taught me that I needed to adapt to survive in the stock market.
But sometimes what’s required for trading success can go against your most innate personality traits…
Say ‘NO’ to Stubbornness
I’m a naturally stubborn trader. I want to nail every setup to the absolute maximum.
In other words, I’m a perfectionist. And this part of my personality has its pros and cons.
I’ll always recommend that you strive to be the absolute best trader you can be. But there’s a fine line between steadfastness and inflexibility…
If you think you’ve found the one-and-only strategy that will work in every market condition — you’re wrong.
I’ll let you in on a hard truth: One day, that pattern will fail to deliver.
And in those moments, if you don’t have a diverse playbook to pull from, you’ll be left in the dust by other traders who do.
CAUTION: Prepare to adapt to ANYTHING the market throws at you.
If a certain sector has been tanking for weeks, and it’s finally seeing a bounce … You should be entertaining the possibility of dip-buying.
On the other hand, if the stocks you’re trading long have been soaring consistently, only to face a hard rejection … You need to be ready to flip to the short side.
Take it from me. I’m always working toward fighting my stubborn urges and viewing each setup objectively.
And when I’m able to do this, I trade better than ever.
Bottom line: Don’t be stubborn — be nimble!
Trading is my life. I’m in it for the long haul. But I’ve learned to not get too comfortable in a particular market. Conditions are always changing.
Traders who rely on one pattern or setup will eventually get a wake-up call — or a margin call — that they could have easily avoided.
My advice? Build your playbook. Be nimble. And get ready to adapt to any conditions the stock market throws at you.