Maintaining Sanity in a Schizophrenic Market

The current market seems to be manic depressive without even a shred of memory from one day to the next.  How does a trader preserve control and commitment when faced with this challenge?

I think the first place to begin is with the questions we ask ourselves.  Is there an opportunity here? Where is the opportunity now?  How can I take advantage of this opportunity?

Then ask yourself, how do I deal with the volatility?  Do I decrease size and stretch out the risk parameters?  Do I increase size to take advantage of this extraordinary opportunity?  Do I shorten or increase my time frames to increase my safety and profitability?  As traders we are always faced with the dual needs to seize a significant opportunity and to preserve our capital.  This balancing act is at the core of trading.

Of course, you need to address the underlying fundamentals.   What are they? Are they becoming more so or less so?  Are they changing or remaining the same?

Define the problems you are facing and redefine them.  Einstein was asked how he would go about solving a problem if he only had 60 minutes in which to solve it.  He answered that he would spend the first 59 minutes defining the problem.  Once you’ve identified and defined the issues you’re facing, look for workable solutions.  See problems as challenges not as threats.  I always assume if there is a problem, there is a solution.  Once you’ve found a solution, test it.

You need to sustain an optimistic outlook.  This means not taking market conditions personally.  Know that the difficulties will pass as well as the opportunities.  You can learn from difficulties and let them go even as you learn from and utilize opportunities.  Keep honing your skills and see the glass as more than half full.  You can heal your trading by finding a way to understand evil even as you find a way to make the best of a situation.  Any crisis can make you stronger if you don’t let it make you weaker.

So let’s go back to the original question.  Where is the opportunity here and now, and how do you go about taking full advantage of it?  When you find it, go for it.  If you don’t find it, wait for it to develop, and carpe diem (seize the day).