We take a sequence of trades where we feel we are right in the zone, where we can't do anything wrong, where every trade is a winner. And then it stops. And then if we continue doing what we were doing so well and so happily, it's suddenly all losing trades. Suddenly we are buying the highs and selling the lows. The "sweet spot" has ended and we need to wait for a new one.
But most of us don't. We don't listen to the market and believe that it couldn't have changed because we are in the zone and made 9 winning trades in a row and we are the masters of the universe and how the next trade will be the continuation of the good times. But it won't, until the next "sweet spot" comes.
It's all in the context. Remember the oft repeated saying: "The market can stay irrational a lot longer than a trader can stay solvent". It's important to recognise the context within which we are trading. Whether there is real order flow or just random buying and selling. Unless the market is being driven directionally, I can't make money trading my pullbacks. If the market is just chopping around, I should either stop trading or fade the rotations. If I'm using an algo, I need to make sure that the algo can cope with changes in context or hybrid trade and turn on the right algo for the conditions.
I am up very early in the morning and usually spend a couple of hours writing emails to the guys I'm mentoring in response to the marked up charts or questions they send me. I also keep an eye on the markets and with the recent increased volatility, it's been worthwhile again.
Today's ES move up started just before I got up but I managed to get my share of the goodies. As you can see, the Order Flow filter told me when the move was likely to be over and I didn't stay at the party too long.
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