Day Trading Tips and Tricks

February 9, 2024

Indicator Warehouse

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Dealing with Despicable Markets

new futures market

Whenever the market moves into an inactive state, and we have a few rough days, I get flooded with a range of emails.  Some people start doubting their system(s), while others begin to question the specific instruments(s) they’ve been trading.  The emails that touch me most are people about to give up on trading altogether.

Most of the individuals in the latter group are new to trading, have heard great things about trading, and took the plunge.  They are blaming themselves, the trading system, time of day they can trade, etc. for the shortcomings of a bad market.  Many think their experience since starting trading is how the market always is, and their dreams of success just seem to vaporize in front of them along with their trading accounts.

The reality is that markets are cyclical, and have periods of greatness and periods of weakness.  Even with the best NinjaTrader trading system, excellent money management, and the support of a cast of trading mentors, certain markets will just simply not yield results worth trading. Working with successful long-term traders has taught me that one of the biggest skills one can have to “make it” in this game is the ability to avoid trading bad markets.  Yes, sometimes the most profitable decision is only walking away.

Well, then – if you are spending so much time NOT trading a particular instrument, how do YOU make money? Great question!  Simple, trade another market!

Yes, it’s a big world out there folks, and there are plenty of different instruments to trade, even within the commodities markets. And although we always recommend specializing in one or two instruments, in particular with a single instrument when you are learning to trade, there WILL come a time when you simply cannot make consistent, reliable profits in any single instrument.

But, that won’t last forever, it is impossible to tell exactly when your favorite instrument is going to get back on track and be tradeable.  Sure, we can distinguish bad markets from good ones, but we can NEVER predict when they will change from one phase to another (If anyone tells you they can PREDICT what the market will do, walk away and cover your ears.  They are either ignorant or lying to you.  Great traders are not fortune tellers, regardless of how their results or “calls” might appear.

So there comes a time in every trader’s journey, which it’s time to break out of what you are trading and start studying another market.  This situation comes with its set of challenges, and although the fundamental skills are universal to all markets, each instrument always has its own “nuances” that have to be studied and “owned” before one can make consistent profits from them.  

road map for a new futures market

Here are some tips if you decide to check out another market:

Don’t Expect Overnight Success:  Just as you had to spend lots of time learning how to trade in the first place, don’t expect just to jump into another market and make lots of money (although you COULD make money, that might be a trap in and of itself).  Take your time, get to know the market.  It takes a bit of time before we see enough of anything new so that we start noticing rhythms, patterns, and the “flow” of how each market/instrument works.

Observe and Report:  When testing the waters in a new futures market, one should spend NO time trading, and ALL the time just watching the new environment.  You should do this like a scientist would if they discovered a new species or country.  We want to learn as much as we can about the new futures market, and by taking pressure off of having to make great trades, we allow ourselves to keep our eyes and minds focused on learning, rather than doing.

Clear Your Mind:  Don’t come into a new futures market and slap a bunch of biases that carry over from an old market.  For example, if you are coming from the Emini (ES) to say, the NASDAQ (NQ), you wouldn’t want to use the same stops just because they worked in the ES.  The NQ has an entirely different level of volatility and price action and requires a slightly different approach.  By bringing rules and biases from one market to another, it is entirely possible to sabotage the operation from the start.  Keep an entirely open mind and learn what the new futures market/instrument is telling you, rather than trying to fit another instrument’s rules into the new one only to save time.  There is no sense in forcing the proverbial “square peg into a round hole.”

Write It Down:  It will be beneficial to write down your findings, start jotting down potential rules.  Although there are some savants that can simply remember EVERYTHING they see/hear/experience, most of us can’t.  There is wisdom in keeping great notes in a trading journal on your new adventure.

Refine and Test:  There is no reason to think the first time you look at something new you will know everything about it, and it is going to make your job so much harder if you are looking for the “perfect” set of rules/approaches in coming to a new futures market/instrument.  If you start to see some patterns, although you aren’t getting the whole picture, this is a place to start.  As you continue to test your hypotheses about the new futures market, you can refine and adjust these rules/approaches until you are sure there is validity to them.  Then you check on a demo, and when you have confidence, THEN and ONLY then should you apply real money to the new futures market.

You see, giving ourselves multiple markets to trade is the same reason we use multiple approaches/systems/tools in one market.  There is no one-size-fits-all approach to any single market, and the same can be said about a traders approach to trading.  Learning a new futures market will enhance you psychologically, give you more trading opportunities and take the pressure of having to perform in a bad market when the conditions are not conducive to making consistent gains.

Now get out there and learn!  May the trades be with you!

See how we deal with Despicable Markets in our Trade Room (every Wednesday).  Click HERE to Register.

February 9, 2024

Indicator Warehouse

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