Situational awareness is key to long term trading success. The US Air-force developed the OODA Loop for making SA decisions for fighter pilots.
The OODA Loop is the cycle of Observe – Orient – Decide – Act – Observe – Orient – Decide – Act
Similarly in stock market you need to use the the OODA Loop
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Some details about OODA
Some details about OODA
Develop a framework for trading decision based on Situational Awareness, when to be aggressive and when to to use which setup.
Situational awareness helps reduce drawdowns and frustration.
Developing two types of Situational Awareness short term and long term can help you time your entries and exit better.
Early in this bear market the Situational Awareness was this is likely to be longer duration bear market based on historical observations of big increase in traded stocks in 2021.
But within duration bearish markets there can be tradable rallies. We might be due for that here.
Every trading day, first thing in the morning I develop short term Situational Awareness in the context of longer term SA and decide on which setup to focus and how much to risk.
In first few years of trading career lack of Situational Awareness would result in me giving up lots of gains. That is when I first developed the SA framework. Over the years it has been refined.
Once you have a setup in place create a Situational Awareness framework to support your setup. Write your own guide for SA that will guide when is best time to trade your setup and how aggressively.
More you focus on Situational Awareness more in control of your trading you will be. If you are struggling I highly recommend creating a Situational Awareness guide.
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