Market awareness is an important component to technical trading. The ability to read the market in terms of direction and ‘mood’ is a learned skill. Similar to being a good poker player:
“You’ve got to know when to hold ’em
Know when to fold ’em
Know when to walk away
And know when to run
You never count your money
When you’re sittin’ at the table
There’ll be time enough for countin’
When the dealin’s done”
©1978 by Don Schlitz
As the song suggests you’ve got to know when to hold a position, when to get out of a position and when not to trade. Market awareness comes into play when you use it as a guide to deciding which strategy to employ. Remember, as a day trader you get to come into the market each day without an opinion that could be dictated by any positions that were carried overnight. As a day trader having an overall bullish or bearish opinion does not bias you allowing you to “go with the flow”. In today’s world of algorithmic trading it is important to have the ability to move in conjunction with the order flow. Trying to determine the what and why’s of the markets daily gyrations takes the attention away from the opportunities being presented, which ultimately leads to falling back on old habits such as hesitation on pulling the trigger, or stopping to question who is buying and for what reason.
Today’s markets are totally automated. Trading floors are basically non-existent in that orders are electronically transmitted directly to the various exchanges and executed anonymously. When I enter an order to buy or sell the NQ I have no idea who the contra-party is nor do I care. With algorithms generating signals across the wide spectrum of the various types and styles of traders from index arbitrage to day traders to futures and options traders. High frequency traders have added volume and speed to the process leaving me to continue to say – if you can’t beat them, join them. Having the right trading tools makes all the difference and those tools include trading platforms (algorithms) and strategies coupled with a solid sense of market awareness, and an awareness of your individual emotional and physical state of being. When one or more are out of sync with the others trading can and usually will be a losing proposition.
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