Skip to main content

Markets are Living, Breathing Organisms. You Must Adapt.

As we head into a new year and prepare to leave the old one behind, it's natural to reflect on the challenges and opportunities we'll encounter on the road ahead.

Looking back on 2015, it was a tough year in the stock market for retail and professional investors. In fact, hedge fund returns were so poor that many funds have simply shut down or converted to family offices.

So who did well in this challenging market environment? As the Journal points out, "A Bold Few Traders Earned Billions Flouting Rivals", and conventional wisdom. By steering clear of consensus bets on oil, energy stocks, junk bonds, Apple shares, and currencies, a few skilled hedge fund managers were able to structure their own winning trades and prosper as their rivals faltered. 

Which brings us to our lesson on trading and the ever-changing nature of capital markets. Here's what S&P futures trader and "Market Wizard", Marty Schwartz told aspiring traders at Amherst College:  

"Markets are living, breathing organisms. You have to adjust with them and continually change your methods." - Marty Schwartz

So does that mean we throw out all our rules and disciplines, or abandon risk management safeguards when market conditions change and leave us baffled? No, but we can recognize the need to adapt to changing patterns or trends and learn to position ourselves for success in new market environments.

How important is this skill of adaptability? Well, the head traders at SMB Capital (Steve Spencer and Mike Bellafiore) have identified this trait as a key pillar of trading success, as well as the "#1 Trading Frustration" that most traders, new and old, face.  

Looking ahead, we don't know if the markets will change due to shifts in technology (HFT and "algos"), broadened participation (new entrants and market participants), abrupt rule changes or shifts in regulation, changing correlations, or shifts in price trends (range-bound markets may turn down or trend higher). 

What we do know is that change is inevitable and constant. While human nature seems to remain largely unchanged over time, we must learn to adapt to the shifting tides that occur within our lifetimes. How will you adapt to coming trends and market changes in the new year ahead? Will you make the necessary adjustments to your trading plan, or will you be left behind?

"In times of profound change, the learners inherit the earth, while the learned find themselves beautifully equipped to deal with a world that no longer exists." - Eric Hoffer

Related posts:

1. Marty Schwartz Talks Trading at Amherst (VIDEO).

2. Ray Dalio: Lessons from Hedge Fund Market Wizards.

Subscribe to our free email newsletter. You can follow our real-time updates on Twitter. 

Popular posts from this blog

Lessons from Hedge Fund Market Wizards: Scott Ramsey

Today we continue our series, "Lessons from Hedge Fund Market Wizards" , with a look at Jack Schwager's interview with Scott Ramsey of Denali Asset Management.  Ramsey, a futures trader and CTA who works on the island of St. Croix, spoke to Schwager about his first foray into the markets, his evolution as a trader, and the process he stands by to protect and grow his clients' money. 1) . Ramsey started trading in college. He was roped into the OTC metals market via a broker's ad in the Wall St. Journal. The broker charged customers a flat fee to buy and sell as much as they wanted in a particular market for six month. At the time, Scott was a novice and didn't know about futures, so he traded metals in this fashion through the inflationary run-up of the late 1970s. 2) . Scott had to rethink his trading strategy after he bought silver at $50 an oz., only to watch it collapse to $26 following a long string of limit-down days. He sold as soon as the market...

Finance Trends 2019 Mid-Year Markets Review

Email subscribers of the Finance Trends Newsletter receive the first look at new articles and market updates, such as the following piece, sent out to our email list on Sunday (6/14).   Hello and welcome, everyone! If you received our last email notice over the July 4th holiday, you'll know that this weekend's newsletter will serve as a mid-year market update and a follow-up to issue #29, " How to Reinvest in a Rising Market ".   Ladies and gentlemen, without further ado, let's start the show...  Finance Trends Newsletter: Our Mid-Year Market Review When we last spoke, back in February, the U.S. stock market was rallying off its December-January lows. As the S&P 500 and Nasdaq reclaimed their 200 day moving averages in February and March, it became increasingly apparent that a lot of retail investors (and perhaps some institutional investors) were left under-invested while watching this recovery move from the sidelines.  The U.S. stock ...

How to "Pull the Trigger" on Your Trading Ideas

In our last post, I quoted hedge fund manager, Jim Leitner on the importance of following up on your investment ideas.  Today I'd like to follow up and share some thoughts on how you can learn to consistently "pull the trigger" on your best trading setups and investing ideas. In order to help you do that, we'll take from the best and offer up key insights from interviews with top traders and trading psychologists like Alan Farley, Brett Steenbarger, and Doug Hirschhorn .  Now before we get to their key insights on overcoming trading anxiety and pulling the trigger on your trading ideas, let's remember what Jim Leitner said in his interview: "Learn to love to listen to people and when you hear something interesting, follow up on it. Don't just think, "Well that's an interesting idea" only to find out a year later that the company you could've bought shares in is now up 500-fold. You never want to say woulda, coulda, shoulda...