There are many novice computer programmers out there that build automated trading systems and hope that they will be able to make millions by letting the system run. There are also many new traders out there that learn a strategy and think that using it every day will make them rich. There is a huge problem though, markets are not static, they are dynamic and always changing. One MUST learn to adapt to each type of market or they will find themselves with a great deal of frustration.

Let's use the day trader for example. Let's say you are a day trader who likes to play stocks that are breaking out. If you were to play stocks that were breaking out every single day it is HIGHLY likely that you will have a losing record and a negative p&l. Why? Not every day is suited for such a strategy. Some days the markets will be powerfully pushing higher and the bulls will have complete control of almost every stock out there. On those days, yes breakouts will reward you handsomely. There are, however some not so bullish days where fear and temporary panic can cause markets to sell off relentlessly. If you are trying to play breakouts on those days it's likely that you will fall victim to the bears and leave in frustration.

Longer term investors have the same issue just at a much slower pace. We all know that the trend is your friend and you ride it until the end. Well if you are the type that likes to ride a long trend then you should be doing well as of this writing. If you were to try and buy stocks that you hoped would start an uptrend during the financial crisis then you were quite frustrated.

The point is that you cant just have a strategy and deploy it in a static environment. Ask yourself what the market mood is and if that suits what you hope to achieve. If you are unsure then you can always use smaller stop losses and test until you gain that "feel" for market moods.