There are so many different strategies and ways to trade the market. The key is to know when the time is right for your strategy. When it’s right, get aggressive. When it’s not, scale back. The biggest challenge for many traders is to ACCEPT the times when the market environment is not favorable for your strategy. More importantly, having the discipline to scale back is critical because forcing trades can become very costly.

For example, value investing worked great in 2009 after many stocks were beaten down, but it doesn’t work so well after a big run in the markets. Momentum works great at times, but not after many stocks have ALREADY run and are extended. Mean reversion works great when the market is in a range, but not when the market is grinding straight up or falling straight down.

I respect all strategies as long as you incorporate some form of a loss-cutting policy around it. I have talked to many traders over the past few weeks who have been hit pretty hard. Many were up nicely on the year, but have given back all their gains and turned negative. If you are struggling, keep your head up! Stick to your discipline, keep things light, and save your money for when market conditions become more conducive to your strategy.

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