Flexibility is an essential part of all jobs. It is defined as the ability to withstand and Quickly recovers from difficulties. Flexibility is much needed in day trading and investing, where losses and disappointments are common.
Historically, we’ve seen many investors go through periods of adversity and get back to normal. For example, Bill Ackman is known to have lost more than $5 billion when his bets on Valeant Pharmaceuticals and Herbalife collapsed.
He could give up because customers withdraw their money. But he did the opposite and thrived. In this article we will explain some of the best ways to develop flexibility in trading.
Definition of resilience
Flexibility comes from the word elasticity. It is defined as the ability to withstand and bounce back from a difficult situation. For example, if you fail at something, resilience will help you recover and thrive as quickly as possible.
As a day trader, flexibility is one of the vital skills You need because of the number of trades you will need to execute each day. Speculators execute more than 50 trades on a given day. And not all of these deals will always be profitable.
Therefore, it is important to have the spirit of flexibility as a day trader. Without it, you will likely give up right away You are executing a losing trade. Alternatively, your losses may put you in a state of psychological distress.
Why do traders need flexibility?
There are many reasons why you need to be a flexible trader. Let’s take a look at some of the most popular ones.
The market is unpredictable
First, the financial market Often very unpredictable. It is often not always possible to predict what will happen in the future.
For example, global Stocks fell shortly after Covid-19 declared a pandemic And then Organized One of the fastest recoveries registered.
This recovery was the result of the relatively cautious policies by the Federal Reserve. Therefore, it is difficult to accurately predict how the market will react in the future. As shown below, the NASDAQ 100 does not always move in a straight line.
Nobody is 100% accurate.
The second reason is that no one, Including the best traders and investors, accurate 100% of the time. As such, however good you are, there will be some winters. Therefore, it will help to be flexible Be a better trader even in times of adversity.
In addition to Bill Ackman’s example above, most traders have gone through such periods. For example, Hedge fund Ken Griffin It nearly went out of business during the 2008-2009 financial crisis.
But he remained resilient. And in 2022, he made his own hedge fund he won More than $16 billion. If Ken Griffin can get through such a crisis, how about you?
mental health concerns
Another reason why flexibility is important to traders is mental health concerns. One of the most important things a trader can go through is mental health.
It is not uncommon to see many traders going through a file A period of persistent depression. Therefore, resilience can help you deal with these mental health concerns.
Adapting to market conditions
Moreover, as mentioned above, flexibility can help you adapt to different market conditions. If you are good at making money in the trending markets, flexibility can help you navigate the gradient markets.
A perfect example of this is what we saw in the cryptocurrency market in 2022 when bitcoin and most altcoins crashed by more than 70%. Being a flexible trader will allow you to make money in all market conditions.
Avoid prejudices
Finally, being a flexible trader will help Avoid some popular prejudices In the market. Some of the most important biases are recency bias, affective bias, and primacy.
The recency bias is the process of considering a lot of relevant events that have occurred recently when making a decision.
How to build flexibility in day trading
It takes time to build resilience. In our experience, many experienced traders are usually more flexible than inexperienced traders. there Several tips This will help you to become a flexible trader.
Risk Management
The most important thing in building resilience is risk management, which is defined as the process of minimizing risk while maximizing returns. There are many risk management strategies one can use in day trading, including:
- Don’t risk too much – You should always place your trades well, which means you should not risk too much money on each trade.
- stop loss Always keep a stop loss in all your trades. A basic stop loss or trailing stop loss will automatically stop your trades when you reach a certain loss level.
- Profit taking – Take profit will stop your trades when you reach your target profit level.
- Don’t over-trade – You should always avoid over-trading as it always exposes you to more risks.
Having a proven trading strategy
The other thing to keep in mind is to always have a file All-weather trading strategy It works well in all market conditions.
As you begin your trading career, you should devote a significant amount of time to developing a good trading strategy that meets your style and preferences.
Some of the common types of trading strategies are:
- Scalping
- Follow the trend
- swing trading
- Copy trading
Among other things.
Manage your expectations
While you want to make money, it is important for you to do so Manage your expectations Good. In most cases, you will have high expectations when starting your trading career.
Moreover, you have probably heard that it is easy to double your money in the market. However, in most cases, your expectations will not be fulfilled due to how the market works.
Therefore, you should always manage your expectations well to avoid making serious mistakes.
Working in a team
Moreover, while being a solo trader is a good thing, it is also a lot It is best to work as part of a team. At DTTW, we have seen many traders fail as singles and then succeed when they are part of a team.
We encourage you to embrace teamwork in an effort to enhance your flexibility.
Learn constantly
Finally, in addition to having a good purpose and working as part of a team, we encourage you to embrace it The path of continuous learning.
This means that you should always work hard to learn new things about the market and your trading strategy. Learning will help you understand how other traders handle flexibility and how to avoid mistakes.
Essential opponents to build your flexibility
There are many things you must work hard towards when building your resilience. Some of these things are:
- losses To build your resilience, you need to learn how to manage your losses well. You should not let your losses cause you to make more mistakes.
- earnings Sometimes making too much profit can damage your judgment. Therefore, you should always learn how to handle your winnings well.
- Rumors – Another thing is how to fight and handle rumors in the market. A common thing about rumors in the market is buying the rumor and selling the news.
- Psychological and emotional traps Furthermore, you must work on dealing with your own psychological and emotional traps in the market.
summary
In this article, we’ve looked at some of the most important things to watch when considering resilience in the marketplace.
As we have seen, flexibility is crucial. And as such, you should Work hard to guarantee that You build it If you want to become a successful trader.