Adam's RX
Get a Feel for this!
Nothing in the stock market is textbook. In order to be successful as a stock trader, we have to, at some level, obtain a feel for the market. If things were simply textbook, anyone would be able to do this. However, in order to make a career out of trading, we need to develop a feel for the market.
Trading stocks is similar to a sport. Take basketball for instance. I don’t care what book we’ve read, or even if Michael Jordan came down and verbally told us how to play the game, we’d need to stand at the free throw line and start shooting to get a feel for our shot. Once we get a feel for our own game, we can excel.
Learning to trade stocks is the same thing. By watching and putting the time in the market, we will obtain a feel. All too often I see traders trying to find a textbook method on how to trade – when A happens I do B, when stock crosses this I immediately do that.
The market can be very irrational at times and if you trade strictly “by the book” without using your distinct feel for what is happening, it can be detrimental to your P&L. True there are some textbook situations, just like a sport. Overall, however, in order to trade successfully, we need to hone those instincts (that feel) that will help us make split decisions when needed. The worst thing to do is to resist those instincts and go into a trading day saying to yourself, “I’m looking for this specific thing to happen and whenever this happens I do that.” That is a very mechanical, robotic way to trade. We need to let the market tell us what to do.
A feel for the market means a feel for the stock(s) you are watching, a feel for the S & P futures, which tend to dictate the market, and a feel for how one influences the other. No matter what information we have at hand – stock, futures, economic number, etc – being able to sit back and get a feel for how one market element reacts and plays off the other is the key. A feel is sensing a change is about to happen, and that comes from paying close attention to the market. As traders, we need to develop this ability.
Adam’s Prescription: One of the biggest mistakes I see traders make is trying to trade strictly by “the book”. We need to relax, sit back, and let the stock tell us what to do; we use our feel as the backstop in our decision-making. In my case, it’s the biggest variable. Nothing overrides my feel. I don’t let anything override my feel. My feel is where I’m going to end up going. Work on this feel, go into the trading day open minded, stop looking for textbook situations, and let the feel come to you. I assure you, you will notice a difference..
Adam is one of Wall Street's most respected proprietary traders, known for his trading consistency and ability to develop successful traders. He runs trading desks in Los Angeles and Miami and also maintains a remote trading desk that allows him to develop traders across the United States. AdamsRx@gmail.com |
