Switching Strategy Mindset Insights
As you may already know, I recently decided to focus my trading on a single strategy which is also the one I’ve struggled the most as a newbie trader. That is momentum trading. There are several reasons that motivated me to make this move that I’ve already discussed (if you wish to know further, read more here). Today, I want to focus on some insights that are coming out as this challenge unfolds that I believe you’ll find helpful.
In fact, I am at my eighth day into this and here are the lessons that I have learned so far. In particular, I’ve recognized that everyone of the general concepts that were already part of my fundamentals as a trader still completely apply. This is great because the learning curve is going to be much shorter than what it would have been starting from scratch again.
It is amazing to notice how much the good and bad habits remain intact once working with a totally different strategy. That’s why starting with strong education like the one offered by the Warrior Pro program has been so beneficial in starting my trading career. So, in this article there would be not enough space to discuss what’s in common but I’d rather explain what’s different.
The “Only” Difference Is Speed
The one and only big difference in using the momentum strategy is how much time it took for a trade to work properly or to eventually fail to follow through. Here is why I just wrote that this difference is “big”. Since every detail matters in making consistent profits while trading, this set of concepts is really something to keep under close watch if you consider switching to a faster moving strategy:
- Decision-making process speed: moving to the momentum strategy coming from other day trading strategies would imply an increased level of mental alertness. Give yourself enough time to systematically recognize the most promising setups before jumping into the next trade. Fast decision-making process doesn’t mean having any kind of rush in trading. Instead, it is somewhere in the middle, so limit your exposure until you’ve consistently shown yourself you’ve figured it out.
- Experience on watching the level 2 data: this one strategy can be impacted by the ability to interpret the Time&Sales and level 2 data in real-time more than any other. Make sure that the grade of comprehension of this aspect has been well understood before transitioning to momentum.
- Average time in the trade: the huge potential behind this strategy is represented by its the huge percentage returns within very little amount of time, very often a span of a few minutes, sometimes just a matter of seconds. Breakout or bailout mentality is probably the most important concept to be applied in order to mitigate the risk of non-collaborating trades.
- Adequate tool setup: the successful application of this strategy requires the best tools to access real-time data. That includes the highest level of confidence on working with hot-keys. Do not even think to master the momentum strategy without this area of competence well in place.
- Ability to handle emotions: being overwhelmed by emotions is what’s leading the way in creating bad habits while applying momentum. Exactly like every other strategy, planning the trade includes setting tight stops and, more importantly, rationally executing the plan as the trade takes place. Doubling up to the winners to maximize profits and quickly stopping out to minimize losses are counterintuitive routines that will make trading profitable in the long run.
In conclusion, I can reaffirm that a deep change in mentality is required while landing into a new trading strategy in order to be profitable, even if the vast majority of concepts still remain intact. So, in order to perfect the application of a new strategy every detail counts and every mistake can be your best teacher in the path to the ultimate success.
Put your best effort to learn from each one struggle and do not give up in the middle.
Trade safe,
Roberto Barbaro