Reversion To The …. Blown Account

The markets have been trending nicely of late and one could argue it has been since the beginning of the year. For those who aspire to use the most over-hyped phrase in trading, ‘the trend is your friend’, the markets have provided some interesting trading opportunities, even if you couldn’t catch them all.

On the other hand, different trading styles are having a tough time of late. Strategies using a ‘reversion to the mean’ concept can at times be like trying to catch a falling knife.  Day traders using tools such as Bollinger bands, keltner channels and even some market profile concepts are finding winning trades to be a tough go. These methodologies that some diehards claim to be an ATM machine during summer doldrums or December holidays are finding it frustrating of late and landing continuous stop-losses due to a failure of price to reverse.

The challenge I see when mentoring traders is their inability to identify the type of market as well as  adjust their trading style when they do recognize them. Traders tend to be loyal to their strategies; just like a dog to their master. Why not? These methodologies have proven beneficial to them over time. Continue reading "Reversion To The …. Blown Account"