There’s been a huge shift in the markets in the past few months. Record-high inflation, the Russia-Ukraine war, soaring oil and gas prices — there’s a lot to deal with.
A lot of traders are losing because they try to force trades. They don’t understand why their go-to strategies aren’t working anymore.
In times like these, adapting is vital to your survival in the stock market. I want to help you understand why — as well as how to make adjustments.
Mike “Huddie” Hudson is a great example of how to adapt and thrive in a changing market. This self-proclaimed ‘impatient’ trader recently had to make some trading tweaks, which he talked about in-depth in a live webinar.
(SteadyTrade Team members can watch the replay here. Not a member? Sign up here.)
There’s a lot to unpack from his webinar about adapting to changing breakout patterns, so let’s dig in.
Here’s how Huddie’s been able to stay profitable in a changing market…
Note: Want more choppy-market inspiration? This trader was able to save his family business — and pay off his house! Here’s how.
Table of Contents
- 1 A Changing Market
- 2 Adapting In a Messy Market: 3 Tips
- 3 Markets Will Change. Can You?
- 4 One Platform. One System. Every Tool
Breakouts are one of Huddie’s favorite long strategies. He initially learned this trading style from one of the greatest traders of all time — Tim Grittani. (Get your copy of his famous “Trading Tickers” DVD here.) Over the years, he’s adapted his own version of the strategy.
In 2020 and 2021, he traded this strategy all the time. It helped him pass the million-dollar profit mark. Don’t miss this episode of the TWIST podcast featuring Huddie the week he became a millionaire…
Here’s how he traded this pattern:
- Huddie looked for daily breakouts over key levels in stocks with high volume and little overhead resistance.
- He’d take a position in a strong runner as it broke out and the stock would consolidate into the close.
- He’d hold overnight. The next day it would gap up huge and he could sell into the morning spike.
Support.com Inc. (NASDAQ: SPRT) was his last big breakout trade. (The company merged and now trades as Greenidge Generation Holdings Inc. (NASDAQ: GREE).) In August 2021, the stock broke out around $14 or $15 and closed around $19. The next day it gapped up to $50!
But nothing lasts forever…
A Changing Market
In the last six months, Huddie’s go-to pattern and strategy haven’t played out quite as well.
In the current market, there aren’t as many massive overnight gap-ups. Big moves take longer to develop. The markets are choppy, so there’s more sideways action and consolidation.
Sure … You could still buy the breakout level and hold with a wide risk. But that doesn’t work for every trader. Huddie’s one of them…
He knows that holding longer than overnight doesn’t fit his personality. He’s not comfortable with long trades to start with. And he’s not a patient trader. Holding through big dips makes him emotional.
For him, there were two choices: either stop trading breakouts or adapt and change his approach and expectations…
What Adapting Looks Like
Here’s how things have changed for Huddie.
On February 3, 2022, Kaival Brands Innovations Group, Inc. (NASDAQ: KAVL) had a big daily breakout over the $1.10 level.
That’s normally where Huddie would buy the breakout and hold it overnight. But he didn’t this time. And it’s a good thing he didn’t…
Instead of gapping up the next day, KAVL gapped down.
After watching KAVL for a few days, Huddie noticed a blatant pattern on the chart…
It would have a big green candle followed by a day of consolidation, then another big green day…
After seeing this for a few days, Huddie tried something new.
He bought at the end of the consolidation day and held overnight expecting a gap up in the morning.
His trades worked. But they didn’t lead to huge gains like he had trading breakouts in the past.
That’s a great example of how past performance isn’t indicative of future returns.
Adapting In a Messy Market: 3 Tips
It doesn’t matter what kind of trader you are or how much stock market experience you have — trying new setups is uncomfortable. The best way to get comfortable? Keep trying. Here are three tips to help you adapt.
1. Look For Patterns
Follow Huddie’s lead and keep looking for repeating patterns. Study charts until your eyes bleed. Get a feel for:
- Price action
- Market sentiment
History doesn’t repeat, but it often rhymes. Studying the past can help you prepare for future opportunities.
2. Paper Trade
Paper trading is one of the best ways to adjust your strategy without putting your hard-earned cash on the line. Use StocksToTrade to paper trade new setups in real time. Start your 14-day trial here.
3. Connect With Other Traders
One of the best ways to learn what’s working in the market right now is to observe what other traders are doing. What makes them take a trade? What do they see on the chart or in the price action?
StocksToTrade has a TON of resources to help you connect with other traders. Right now you can get access to STT, chat tools, and more for one low price … Seize this opportunity to learn from others and improve your own trading NOW.
Markets Will Change. Can You?
Change is inevitable in the stock market. Even if the same pattern has worked 99 times in a row, there’s no guarantee that it will work the 100th time.
As a trader, you must be willing to adapt if you want to stay in this game for the long haul.
Even though it was uncomfortable, Huddie was willing to adapt and try something new. It helped him find a new way to trade in the current choppy market.
He might keep looking for this pattern … Or he might change his focus entirely. That’s how adapting works — you’ve gotta keep testing to see what works.
Ready to keep learning? Don’t miss this amazing opportunity…
How will you work to keep learning and adapting to survive in the stock market? Leave a comment and let me know what you think!