Beginners ask professionals “How do you handle this situation? Or this situation..?” or “What do you do when…?” Yet, they don’t like it when they get the answer: “it depends”. The reason is that amateurs don’t understand context. Day trading without understanding context can be fatal to your account. How so? Context makes you ask the question “How is this situation different?” Amateurs place the same importance on every scenario. Professionals with seasoned day trading skills always adjust their thinking and positions because the market is always changing. It changes volatility, ranges, direction, and bias. A trader may get into a trade with odds in his favor while 5 minutes later the odds change, warranting an exit. They don’t just sit there and wait for their profit to turn into a loss; they know how to exit when the edge is gone. Let’s use an example. A Pro day trader decided to short the market because the trend was bearish for the day, and then an immediate sharp violent trend to the upside began. The trader now needs to assess whether a trend has reversed or if stops were hit, squeezing out the “shorts.” Ask a trader one day and he may say it’s a short squeeze and another day he’ll say the trend reversed. Again, the context of the market will dictate: Size of the move, how long the reversal lasts, and how it correlates to the price action that day. Day trading makes you adjust to new situations by evaluating them minute by minute. Day trading forces you to cope with a lot of change in a short amount of time.
