Learning about the nature of price moves in markets, their layers of complexity, and the perceptions that cause traders to act in the ways they do gives you the tools needed to come to your own conclusions about markets.  

Once traders have developed their own understanding of how markets work, they know how to identify opportunities in the markets.

For example, someone who fully understands how markets can turn from bullish to extremely bearish almost immediately can see opportunities to go long volatility while vol is still trading cheaply.

More importantly, they will also know the importance of managing their risks better. Using the above example, the trader who respects how fickle markets can be will also be more cognizant of the need to hedge tail risk.

This simply means taking steps to protect their portfolios from the inevitable large selloffs, with tighter stop loss orders or by using derivatives like futures and options.

Finally, the nature of the questions traders ask will also change. Instead of asking the common, superficial questions along the lines of “Will this rally/selloff last?” They will be able to ask questions that are more relevant to themselves:

“Given this selloff, are my long positions adequately protected?”

This simply means, if the market is falling and for some reason you did not have a stop loss in place before, now is the time to put a stop loss in!

Or:

“Given this selloff, my strategy allows me to take advantage of the possibility of a longer and sharper move lower in the market. How should I size my position, and where should I place my stop?”

This question allows for the possibility of entering a new position, while also forcing the trader to consider how much risk to take if the short position is initiated. 

Both these questions are relevant to the trader as an individual because they directly address how the market’s move (or potential future move) affects the amount of risk they are exposed to.

Consequently, they focus your attention on what you actually have control over — how you manage your risks; rather than what you have zero control over, which is what the market will do in the future.

Focus on more of the former, and learning how markets really function, and less of the latter. Your trading account will thank you, if not with higher profitability, than at the very least prolonged longevity.