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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For traders, one concept that is hard to figure out is the concept of support and resistance.   This may happen because you rarely notice support and resistance until you actually encounter it, and still without using multiple timeframes it can be hard to recognize what is actually happening . 

There’s a lot of effort that goes into making use of technical analysis training to find out in the market where support and resistance levels are.   A variety of tools have been put to use, including moving averages, trend lines, candlesticks, and retracement levels .

Some work, some do not , and more irritating, some work some of the time but not always .   Figuring out when an indicator or tool will work is information that is worth a lot .

Many people find their efforts have shortcomings due to just using one tool , and try to apply it to a single timeframe , and try to apply it under all circumstances .   You reap better results when various tools, optimized for a particular condition of the market , are employed in a well-thought-out and highly organized program that takes into consideration trends and congestion.  Technical analysis training shows that going further towards accurateness when applied to various timeframes at the same time will accrue and various results are considered .

Top results occur when a comprehensive theory of market action is employed that can help the trader understand what the market is doing right now , why it’s currently doing it , what is probably going to happen in the near future , and to give traders a look at what levels of support and resistance may be that can be monitored in real time as the market steps forward .

Does it sound difficult?  Possibly, but it has been accomplished in a number of major technical analysis systems .

Here’s a look at a few definitions .

Support happens to be something that is below price , and this force can push prices back up from where they fell when it is encountered . Support involves buyers that are in the market but waiting to move until the price gets to a certain point , or of position holders that are short and forced to purchase if the market begins going against them .   This group of buyers that flock around a particular price that cause support to actually support prices.

Something above price is resistance, and it is a force that when encountered pushes price back down into the range from where it came . This includes those sellers waiting to make a move until prices hit a certain point , or of long position holders who may be forced to sell if the market runs against them . 

Both resistance and support can be easily identified with conventional technical analysis such as a 10 period moving average . Or it can be represented using a more evolved system taught in technical analysis training like Drummond Geometry .

A higher level of tool use is used in this method to create higher time period overlays of support and resistance areas onto a daily chart from the monthly and weekly charts . These more developed methods provide traders with more support when making decisions to buy or sell . With this method you will see that the support and resistance areas are projected into the future , so traders can be prepared as the market goes on.

Peter Markham is a Forex and financial futures trader with 30 years practical experience in the markets. He received his education in Sydney and Los Angeles and has been a trading consultant worldwide. He has written widely on Technical Analysis training. Among many possible technical analysis courses Peter recommends http://www.drummondgeometry.com for an original and productive trading approach.

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