How to think about seasons in the market

One of the things I've noticed in my student base of traders, which is getting pretty big now and I've been teaching for a long time, so this is a recurring theme that happens over and over again. So one of the things I've noticed in the student base is the way you think about your trading dramatically impacts the way you feel about it and how effective you are at placing trades.

So let me explain with an analogy. And I know, look, there's a lot of analogies that can describe the market, but it's really important to get your thinking right as a trader so that trading becomes an exercise or activity that's in flow rather than you fighting the market. So here's the thing.

Think about the seasons, right? The weather that we have on planet Earth, we go through seasonal, seasonal cycles every year. We have spring, summer, autumn, winter. And in summer, generally you think and expect that you should be able to wear shorts and T shirt, depending on where you live, and go outside and have fine weather every now and then. You get an unseasonally cold day and you wear a jumper or you take an umbrella and it puts a bit of a dampener on your summer experience, but it's not permanent. It. And in winter, the opposite is true. If you're going to survive winter, you dress yourself up, you wear jumpers and warm clothes and you take an umbrella because it's probably going to rain. And every now and then you're going to get an unseasonably warm day. But that doesn't mean winter is over. And one of the things I notice a lot online in trading communities, particularly in crypto trading communities, but also in stocks to a lesser extent, is that when there is an unseasonably warm day in winter in the market, crypto traders like, oh, it's over quick buy, you know, the bottoms in and you know, they load up on the long side and then they wonder why they get smashed two or three days later when the unseasonably warm day in the winter market has come to an end. And same in summer, when traders are getting nervous and jittery in a bull market and there's a couple of big down days because there's a bit of nerves in the market, doesn't mean the bull market's over. And yet people will dump their entire positions and trade like the end is coming, go to cash or go short just because of a little blip in the market. So I want you to think about trading in the markets just like the seasons when you are in a bull market you should generally expect prices to go up, although you know it's not going to go up smoothly and consistently every day. You've got to expect that there's going to be some fluctuations on the journey, right? There's also going to be a lot of profit to be had if you just stay the course and ride the bull market all the way through. This is why trend following is so powerful. If you're trying to snatch little profits from every single move in the market, something a lot of activity, you get really stressed out and also burnt out as a trader. But if in a bull market you just implement a trend following system that follows the entire trend, keeps you in the market for the whole bull market, then trading is actually really, really easy. And when there's a little dip in the bull market, just like when there's a cold day in summer, you don't freak out and think, oh my God, winter is coming and you sell everything and go to cash. You just got to ride through it and it's far more profitable in the long run and far less stressful. And when there's a bear market, every little bounce does not mean the bear market is over. Those little bounces are just people hoping that the good news means that the bear market is over. So when you're going out in winter, right, and there's an unseasonably warm day, you know, you might take advantage of that one day, you might, you know, put on shorts and T shirt, get on the beach, enjoy the sun, that sort of thing for the day, right? Because you know, it's warm that day. Just like in the markets, the market might be going up that day and you can have a very short term approach where you could profit on the long side in the middle of a bear market, but you're not in winter, just because you have one warm day, you're not going to put your shorts and T shirt on and go camping for three weeks with nothing but shorts and T shirt. It's crazy, right? Because you know the cold weather is going to come back and in the markets exactly the same thing. If you're in the middle of a bear market, the markets are going down. Just because you have a couple of up days does not mean it's over. And so we got to think about the longer term, bigger picture. Just like you do with the seasons in everyday life, right? When none of us are stupid enough to go camping in shorts and T shirt in the middle of winter just because he had one warm day. And yet traders all over the planet see One bit of an uptick in the middle of a bear market and rush in expecting that the market's over, you actually need confirmation that the bear market is over. You need confirmation to know that winter is over in the seasons as well. I mean, you can look at your watch and the date and obviously check, because you know what that cycle is. The cycle is not so beautiful in the markets, right? It changes the bull markets and bear markets and different durations, but you know that it's warming up in, in the real world, when you know the garden starts to grow, the grass gets longer, you have more consistent sunny days in a row, all of those things. And in a bear market, in the stocks, in or in crypto, it's the same thing. When the market starts consistently going up, starts making higher highs, starts making higher lows, and the pullbacks.

Are not pulling all the way back to new lows. They're just, there's a small pullback in the rally and then another rally and a pullback and another rally and a pullback, but all the time is going higher. That's when you know that the bear market is over. Now, you can judge all of this or you can put a system in place to do exactly that. And this is the way the method of trading. I would suggest for the vast majority of traders, a systematic approach is way better than trying to judge it, because a systematic approach will say, hey, look, there's a small update in the middle of a bear market. This system can profit from it and the rules will jump on it. Take the trade, get in, get out, and make money. Or the system will say, hey, look, there's a bull market and there's a dip, but that dip is not big enough to prove it's a bear market yet. So I just keep riding my long positions all the way through and profit from the entire bull market. The system takes all of that guesswork away from you. It's kind of like having your own weather forecast, right? You don't need to predict the future, but you just need rules to tell you what to do. And in trading, a systematic approach is what does that. So the best way to profit from the different seasons in the market, bull, bear, and the temporary dips and blips that go on is to have different types of trading systems. You want trading systems that profit from the bull markets, that profit from the bear markets, and also profit from the dips and rallies in each of those as well against the primary trend. The biggest trap is predicting that the market is changing based on a very Small amount of data, right? If you're, if the market is going down and you get a couple of green bars, green candles and the market starts going up for a couple of days, the bear market's not over, right? You need to wait for higher highs and higher lows and maybe across above a long term moving average and all those sorts of things for confirmation. And until you get that confirmation, the way you need to trade is much shorter term, right? If you're going to try and pull profit from the rallies in a bear market, you better be nimble, you better have a short term system, short term set of rules. Because if you try and trade long term in a bear market on the long side, you're going to get smashed, right? So just like in winter when you have a sunny day, you can put your shorts and T shirt on, you can get on the beach for the day because it's a warm day, but you don't go camping for a week in your shorts and T shirt because that's stupid, right? So treat the markets the same way. We got to think, remember, what season are we in? Are we in a bull market or a bear market more broadly? And the way you tell that is you look at the chart and you zoom right out. And one of the best tricks I ever heard is if you print a chart out and put it on the wall, the opposite wall of the room, and you stand back and you look at it. If it's going up, you're in a bull market, if it's going down, you're in a bear market. It's kind of that simple. And you should be trading in that direction. And if you've got a system which is the best way to trade, then your system should have those rules built into it.

So alongside trend following, systems should only be trading when.

The broader market is going up and when it's clearly a bear market, so the price is above longer term moving averages. So this is the way I want you to think about trading so you don't get sucked into.

Believing that the market has changed just because of one little dip or blip, okay? And particularly in crypto space when the markets are really volatile and people are really hypey and there's, there's a lot of people who are trading on emotions. This is really challenging. So putting a system in place absolutely helps because it eliminates all of those emotions, makes it far easier to judge what you should be doing when, because the system tells you exactly what trade to take. So here's the message. If you want to trade in a bull market, good. If you want to trade in a bear market, good. But have a system that guides you and make sure that system fits the market state. In a bull market you want long term trend following and you want to buy the dips with a mean reversion system. In a bear market you want a momentum system to the downside which gets out fairly nimbly when the market starts to rally. And you want to sell the rallies so that you can profit from the bear market and your systems will do all of that for you. So if you want to improve your trading, then the next best step is to get a systematic approach in place. Whether it's stocks or crypto, doesn't matter. And in fact, in both of those markets the vast majority of successful traders are systematic because it eliminates the emotion. So you got to get a systematic approach in place and you've got to diversify. Your trading systems have multiple trading systems. So here's what I want you to do. If you are not yet systematic but you want to learn how, comment below. Systemize. And if you are already systematic but you need to diversify so you can make money in more different market conditions, I want you to comment below. Diversify. Which one are you? Do you need to systemize or do you need to diversify? Because from what I can see out there in trading chat groups and also in the groups of traders that I interact with, it's either one of those two problems. Traders need to now systemize or need to diversify to take the next step to improve their trading. Which are you? Comment below. Systemize or diversify. And depending on what you are, I'll reach out and give you some resources to help you take the next step. Step. My name is Adrian Reid. This is enlightened stock trading. And I want to know do you want to systemize or do you need to diversify your trading? That's all for this video. See you next one. Bye for now.