I got thinking about this from some negative posts in the thread "what salary..." regarding that markets will change as well as the economic outlook. That markets have been particularly good for trading the last few years, and that may change soon.(http://www.elitetrader.com/vb/showthread.php?threadid=80400) What if a recession comes and there is a big bear market, can't that be traded just as good as a bull market, but only focus on the "short side"? When US (or ywhatever market your trading) goes into a trading range when you are a trend follower, can't you switch your market and focus on other stockmarkets abroad, or forex or futures? Also you could develop a trading strategy to use when ranging? And one when trending? Then switch between these?
Try this one http://www.elitetrader.com/vb/showthread.php?s=&threadid=53571&perpage=6&pagenumber=1 B. Steenbarger points at the market as a kind of non-stationary game where the rules are changing over time. The fittest will survive: She or he who will adapt smoothly to the paradigm shift.
The most important thing is to know when the markets change? Then to what it has changed, and then react to this by applying a new strategy that works for the new market.
Sometime there a big changes - i.e. paradigm shifts (stock markets in the 70ies vs 80ies). And sometime you have kind of micro changes like bracketing markets, trending markets. It helps a lot if you can figure out the odds of a trend day vs a z-day.
This is exactly what Iâve found happens to intuitive, discretionary traders when the market cycles change. They do not change. They become frustrated, and they lose money. Indeed, they generally lose so much money (perhaps out of their frustration), that they are unable to stay in the game long enough to accomplish new, implicit learning Scary. I have always wondered why people go bankrupt when they can short instead of buying. I guess it's not so easy
great thread. I thing you need to have a rabbit in your hat for any market situation. I have 1. My long screen 2. my technical screen (support resis, with an oscillator for rangebound situations) and a list for each. I have now compiled a short list (which is mostly etfs..since stocks move really fast when they correct, and i usually miss them) that i watch almost exclusively over the past week or two. with an exact entry plan on each one. you always need a plan and an ace in the hole.
Most traders either don't know the market has changed until long after the fact or they recognize its a different market and will continue using the same strategy that's not suitable for that different market. For example, lets say someone is using a trend following method. The market changes and is in a range bound or choppy market. The trend followers should either not be getting pattern signals or recognized its a range bound to allow them to ignore any false signals by their trend following method. However, a good method should not be producing trade signals in market conditions its not designed for. Reason why I'm a big fan of using different strategies with each designed for a different market environment instead of trying to tweak (change) one method for application in a different market. Any trader that has the ability to recognize a changed market environment and knows what strategy to use for it... That's a trader that is far ahead of everybody else. Mark
...I'm a big fan of using different strategies with each designed for a different market environment instead of trying to tweak (change) one method for application in a different market. I like your observation Mark, you are right on.
You guys talk like it's very easy. Does anybody directly or indirectly have the experience Steenberger is talking about, successful traders that fail after the markets change? He's saying that a lot of people are not able to use different strategies in different markets. Actually, many people don't have different strategies at all.