What to Do When a Setup Stops Working

by | Oct 27, 2022

Picture this: You find the perfect setup that works for you. Everything in your trading is going well. Until it isn’t…

You’re left scratching your head, wondering why your go-to setup doesn’t work as well as it once did.

Sound familiar? Don’t sweat it. We’ve all been there…

The sad truth is that no setup lasts forever. The market always changes, meaning the effectiveness of setups changes too.

I notice a lot of traders are experiencing this phenomenon right now. 

The market has been unstoppably bearish for most of 2022, which has conditioned traders to sell (or short) every bounce.

But this makes bear market rallies — which we’ve seen several times this year — incredibly counterintuitive to trade.

If you get caught too far on the short side in the middle of one of these rallies, you’re toast. 

So what’s the best way to prepare for your setup to eventually fail? And how can you adjust your game plan to work with any market conditions?

Keep reading and I’ll show you…

No Setup Lasts Forever

The market is cyclical. It goes through phases. There’s never one pattern or setup that works well all the time.

And realizing this is one of the biggest leaps forward you can take as a trader.

That said, it’s not that all setups completely die off forever, but they tend to follow the markets. It can be frustrating for traders just starting up — especially if they don’t have many setups under their belts.

For example, as the global pandemic pressed on throughout 2020 and 2021, the tech sector was hotter than ever. 

It made sense. With in-person abilities limited, more people used tech than ever before. That’s why the Nasdaq, which is full of tech stocks, was surging for two years straight!

Throughout this period, my main strategy was shorting overcrowded momentum stocks.

But if you prefer long trades, you could’ve employed a different strategy, scalping or swinging tech calls throughout the entire pandemic bull run.

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Now, imagine you’d been using that strategy, and then January 2022 rolled around…

Suddenly, it was impossible to make money playing tech calls. As the Fed began hiking interest rates, every long position in tech started getting destroyed. 

If you didn’t switch setups … you were doomed.

This is what the market does. It constantly morphs from one phase to another, trying to trick traders into making incorrect decisions. 

Just as you’re getting comfortable with the way this bear market trades, there will likely be a reversal to the upside. 

Bottom line: If you aren’t willing to adapt your setups to the shifting market conditions, you’re probably gonna lose money.

How to Adapt to Shifting Market Conditions

As you can see, some setups never come back to life. And when a setup doesn’t come back, you need to have another reliable strategy ready to go.

I know a lot of traders who use multiple trading strategies. What they use depends on the current market conditions.

With the markets so bearish this year, I see a lot more traders playing puts than they were two years ago.

(That said, if those same traders aren’t ready to switch setups when this bear market inevitably ends, they’ll get smoked.)

But that’s only one example of adapting…

Years ago, I adapted to a changing market by learning to trade options. (Before that, I had primarily been a penny stock trader.)

In fact, this was more of an evolving process than it was adapting — but it was a change that helped my trading career drastically.

I adapted my strategy because I wanted to trade large-cap stocks with more upside than common shares provide. 

So I worked to find a different way of doing it. Options trading provided that possibility and I’ve never looked back.

Discovering the options market was my ‘aha moment,’ but yours may be related to something entirely different.

(If you wanna learn everything there is to know about my options-trading strategy, check out my brand-new ebook right here.)

Bottom line: The key is to become familiar with how market trends are shifting. 

Then, when you notice this happening, immediately switch setups to ones that work against the current market backdrop.

Final Thoughts

Use this as a learning lesson. Not every strategy will last forever. 

As you progress as a trader, make an effort to learn multiple setups to help you trade through any market. 

That way, when a big reversal occurs, you’ll be prepared while other traders are panicking.

Meet Mark:

Mark Croock is a former accountant who after studying under Millionaire Trader Tim Sykes turned his small account into $4.11 million in trading profits by applying Tim’s strategies to options trading.

He started Evolved Trader to pay it forward and help other traders learn how to leverage options


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