It would be very convenient to have a day trading system that worked under all conceivable conditions without fail. Whether the market was consolidating, trending upward, or trending downward the ideal system would churn out profits regardless of prevailing market conditions. Unfortunately, no system adequately deals with varying market conditions that can arise throughout the course of their daily trading session. Obviously, this causes problems for novice and experienced traders alike.

One of the very real problems that day traders experience is adjusting their trading style to the changing personality of the futures market. The very best metaphor that I can conjure is one of fishing. To say the least, fishing is a fickle pastime to engage in. There are days that fish attack a certain type of lure, yet the very next day the exact lure will prove to be of little value. On some days, you’re choice of lures may change throughout the course of the day. The point is a simple one, what works at one point of the day may not work later in the day, or even the next day. In fishing, you have to be flexible and adjust your fishing style and bait to meet the ever changing water and weather conditions.

It’s really not so different when trading. On certain days one set up will consistently result  in profits. On the other hand, the very next day the same set up will produce nothing but losses. I don’t have a rational explanation for this phenomenon other than explaining the market is constantly changing and evolving. Your ability to determine which trades will be a profitable on a certain day is a core skill.

For example, on most days the market tends to honor support and resistance levels. Time and time again the price action will advance and decline to previous support and resistance levels and change direction. Of course, this makes for some very accurate trading for those who are familiar with trading support and resistance. On the very next day however, the market may pay no attention to support and resistance and blast through your support and resistance level as though they did not exist.

What does this mean for you as a trader?

It is essential that you have a number of trades in your trading arsenal and approach the next trading opportunity with a different set up. In my experience, after a few test trades I can usually find the trading setup that is effective for that day. On the other hand, many traders labor away with their preset trading style and endure substantial losses. It is imperative that you ascertain the mood and tenor of the market so that you’re able to match appropriate trades to that day’s particular trading session.

This takes some experience and experimentation to perfect. However it is imperative to adjust your trading style within the overall framework of your trading methodology to meet with changing market conditions. Staying with a trade that worke yesterday but is not working today will results in certain losses. In my own trading, I use a number of setups based upon price action, indicators, and oscillators. I have yet to find a day that one of these indicators would not set up a profitable trade. The secret is to find which setups and/or configurations of setups that will be most effective.

I do say this was one caveat; it is very difficult to trade consolidating markets and I have yet to find a truly effective methodology to profit in markets that are trading in a very narrow range. It is my recommendation that you avoid trading markets that are range bound as they are generally difficult and unprofitable to trade.

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Traders start each day in anticipation of making quality trades. It’s up to the market to provide the opportunities for a trader to participate; and it doesn’t always reciprocate with quality opportunities for a trader to pick out high probability trades.

Trending markets, or markets that are moving in one distinct direction are what every trader likes to see on his or her chart. These markets provide ample opportunity for a trader to showcase his skills and enter high probability trades with potential for profit. Depending upon which article or book you read, markets trend between 30% and 40% of the time. These are times when the trader is most active participating in the market move.

There are other times, however, that the market does not trend. During these periods the market is usually moving sideways in serpentine patterns that invite the trader to try his or her luck. It is seldom a great idea, especially for the novice trader, to initiate trades in consolidating markets. They can be treacherous and very difficult to trade. Consolidating markets, to use a fishing metaphor, is like sitting in a boat when the fish aren’t biting. It can be frustrating to watch the bars roll across those screen without any clear opportunity to trade.

I am a scalper, and I nearly always trade with the trend. In fact, I trade with the trend more than 90% of the time. Less than 10% of my trades are counter trend trades. The only counter trend trades I generally take our tick fades generated by the NYSE tick indicator. Most of the great traders that I have had the privilege of trading with are trend traders, too.

Why?

That’s an extremely easy question to answer. It’s a lot easier to go with the flow than go against the flow. Ask any salmon how fun it must be to swim against the current for several weeks at a time. Its tough work and they get beat up terribly. Counter trend trading is arguably similar to swimming against the current. The majority of the time, the trend may retrace for a few bars and then resume in the direction of the trend. It’s a great way to lose money and destroy your confidence. Of course, it’s easily avoided. Don’t trade against the trend; don’t try to swim against the current.

You might be interested to know that markets that are trending downwards move three times quicker than markets trending to the upside. Markets in an upward trend usually do so in a gradual manner as opposed to the more violent and erratic downward movement typified by downtrends. There are a variety of theories why this phenomenon occurs, and I think the most credible theory states that people tend to sell out of fear and are more pragmatic as they accumulate shares. The logical ramification of these phenomena is that more patience is needed when trading in an upward trend, and downward trend trades need a quick and concise buy/sell decisions.

The point of this article is a simple one, and that is the most profitable times to trade are in trending markets. Non-trending markets are difficult to trade and treacherous; they are best avoided, especially by novice traders.

- About the Author: I am a long time retail and institutional trader who now only trades part time, usually in the morning. I enjoy writing informational articles about my style of trading so others may benefit. Would it be convenient to receive valuable trading tips every night in your email? You can sign up for our free video series by Clicking here These videos contain advanced trading strategies and will enhance your trading knowledge immeasurably. Best of all, they are free! So get your free videos and start trading like the pros. Article Source