Monday, August 30, 2010

Changing market enviroments


Lets start by saying that market evolve and change through time. Its is enough to say that today almost 90 % of all transactions are made by artificial intelligence algorithms. Yes humans set the to operate in a certain way following rules but they are super fast and without emotions. They dont care if they are wrong in a certain trade, their pride isnt hurt. We also have algorithms that can adapt and learn from market conditions, they are called neuron algorithms. They learn from their own mistakes and they learn fast. So its its important to follow this changing market conditions in order to adapt and profit from market.

Humans adapt to certain enviroment, and they are comfortable in it. We enter our comfort zone, where everything goes by the rules and nothing surprises us. Thats the way we are. But if you want to learn and evolve you must step out of your comfort zone. Perfect example of stepping out of your comfort zone is backpaking. Backping takes you out of your comfort zone into unknown territory where you have to adapt to new places, new people and you can see how you react to these new conditions.

In trading routine is your enemy because if markets are changing so should you, if you dont want to loose money. Be ready to change. You should always be alert and thinking what is changing in the market and how to react to it. We had a couple of times this year that stock market suffer severe sell off and then in opposite of all rules of technical analysis market continue with its uptrend. This is an example of changing market conditions and if you are in your comfort zone you will not notice that and you wont adapt.

So how to step out of your comfort zone and test yourself? Try new trading style, trade different markets, try different time frames or reading material about different trading perspectives. If you are a short term trade look at the bigger picture and maybe you get some new ideas where markets should go. Sometimes it helps to take a break from trading and reasses your trading decisions and put things in order. If you are active all the time its hard to take a break and look at the market without any emotions.

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