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

The Dot-Com Bubble in 1 Chart: InfoSpace

With all the recent talk of a new bubble in the making, thanks in part to the Yellen Fed's continued easy money stance, I thought it'd be instructive to revisit our previous stock market bubble - in one quick chart.

So here's what a real stock market bubble looks like. 

Here's what a bubble *really* looks like. InfoSpace in 1999-2001. $QQQ$BCORpic.twitter.com/xjsMk433H7
— David Shvartsman (@FinanceTrends) February 24, 2015
For those of you who are a little too young to recall it, this is a chart of InfoSpace at the height of the Nasdaq dot-com bubble in 1999-2001. This fallen angel soared to fantastic heights only to plummet back down to earth as the bubble, and InfoSpace's shady business plan, turned to rubble.

As detailed in our post, "Round trip stocks: Momentum booms and busts", InfoSpace rocketed from under $100 a share to over $1,300 a share in less than six months. 

In a pattern common to many parabolic shooting stars, the stock soon peaked and began a…

New! Finance Trends now at FinanceTrendsLetter.com

Update for our readers: Finance Trends has a new URL! 

Please bookmark our new web address at Financetrendsletter.com

Readers sticking with RSS updates should point your feed readers to our new Finance Trends feedburner.  



Thank you to all of our loyal readers who have been with us since the early days. Exciting stuff to come in the weeks ahead!

As a quick reminder, you can subscribe to our free email list to receive the Finance Trends Newsletter. You'll receive email updates about once every 4-8 weeks (about 2-3 times per quarter). 

Stay up to date with our real-time insights and updates on Twitter.

Moneyball: How the Red Sox Win Championships

Welcome, readers. To get the first look at brand new posts (like the following piece) and to receive our exclusive email list updates, please subscribe to the Finance Trends Newsletter.

The Boston Red Sox won their fourth World Series titleof the 21st century this week.

Having won their first Series in 86 years back in 2004, the last decade-plus has marked a very strong return to form for one of baseball's oldest big league clubs. So how did they do it?

Quick background: in late 2002, team owner and hedge fund manager,John W. Henry(with his partners)bought the Boston Red Sox and its historic Fenway Park for a reported sum of $695 million.

Henry and Co. quickly set out to find their ideal General Manager (GM) to help turn around their newly acquired, ailing ship.

This brings us to one of my favorite scenes from the 2011 film, Moneyball, in which John W. Henry (played by Arliss Howard) attempts to woo Oakland A's GM Billy Beane (Brad Pitt) over to Boston with an excellent job off…