When I find myself struggling to get in tune with the markets, it typically means a few things are possibly going on. The first thing is that the overall attitude of traders might be changing. (The trend is essentially where it shows up, but it should be noted that trend changes aren’t immediate. They tend to be very messy.) The second possibility might be that I am just ‘off’ for the moment. It is also possible that I am caught in a market that has a lot of chop, as traders seem to have no idea what to do. The recent chop has been all about the Federal Reserve, and the interest rate hikes, tapering of bond purchases, and much more coming from there. Some believe they will do four hikes, some think (myself included) that they will never actually get there. I wouldn’t be surprised to see a couple of hikes, and then a reversal. They are essentially trapped.
No matter what the reason for my being ‘out of synch’ with the markets, the reality is that there is only one remedy for this situation: to cut my position size. For example, if the usual risk is something like 1.5% on a trade, then a move down to 0.75% makes a lot of sense. Besides, if a trade starts to work out, you can ALWAYS ADD to a winning position. In fact, I highly encourage this behavior.
Recently, I have been struggling. I am still making money, but at the end of a trading day lately, I feel like I have been boxing. This is a sign that the stress is getting to be a bit much, and quite frankly I think the only thing that has saved me has been experience. The gains have been smaller, but at least I am not blowing my account – which is exactly what I would have done years ago.