I mentioned in my last post that I've found that successful traders tend to have more differentiated views of markets than less successful traders. Before I left for New Zealand, I talked with several traders I had been working with. Several of them have come out of the August weakness very strongly and are at their P/L highs for the year.
One common ingredient for these traders who have been doing well is that they recognized fairly early on that the markets were behaving unusually in August and that their usual patterns and ideas weren't making money as they had been. Moreover, instead of becoming frustrated that their bread and butter trades weren't making money, they reduced their size and focused on the few things that were working.
In the last couple weeks, they've noticed that things have returned to a more normal state of affairs, which has allowed them to move back into trading their old themes and patterns.
Less successful traders trade the same way across various market conditions. Worse, when their ideas and patterns stop working, they become frustrated and try to force the action. The more successful traders know that markets change: they shift their trending, and they change volatility. When their ideas stop working, they become risk averse. When their themes are paying them out, they're not afraid to put money to work.
Stated otherwise, the better traders are always adapting to market conditions. The lesser traders hope that markets will accomodate them. It's another example of how a more differentiated perspective helps traders deal with change--and even thrive during times of uncertainty.
Qualities of Successful Traders