If you've ever been in our futures trading room, you know that my decision on a trade will either come all of the sudden or as an all day wait-a-thon. I think one question that comes up often is why have we focused on one direction, but in the end took another trade all together?
Well, to put it plain and simple. Conditions change!
Through a trading day the market can be telling me go long, go long and everything looks good for a long. Throughout this time that I'm thinking "long trade" I notice small subtle cues the market is sending that may signal a bearish market approaching for that day. These signals within the futures market can be any number of things and some more important than others.
It could be a weak bounce at higher support or a sudden jolt of downside energy as price makes its way down to a level I like. It could be a number of things, but I make it a point to notice these characteristics of market movement. Each time I see something out of the ordinary I make it a point to at least call it out to myself. Some of it sticks while others I simply forget. So I don't stress about trying to keep track or count.
You can call this "tape recognition" , "gaining a pulse for the market", or anything else you want to call it, but don't call it a misuse of energy.
Some will say this causes emotional output to burst from the seams. You are invested in the little movements of the market and some would assume hair loss or unneeded stress. I look at this a little bit differently than most. I think of it as understanding what you're doing and that all factors determine price movement. If you assume these effects will happen to you then you may be right. If you assume otherwise you may be surprised to find out that your mind will sit on your sideline if you ask it to. A healthy disconnect from fluctuations is important, but to ignore these hidden gems of information in my opinion is a bit reckless.
FULL RISK DISCLOSURE: Futures trading contains substantial risk and is not for every investor. An investor could potentially lose all or more than the initial investment. Risk capital is money that can be lost without jeopardizing ones financial security or life style. Only risk capital should be used for trading and only those with sufficient risk capital should consider trading. Past performance is not necessarily indicative of future results.