Sure we keep hearing that the markets are always changing and one must adapt to the changing market conditions for continued profitability and all. Yet looking at recent and historical charts what is evident is the change in volume and volatility. Rest of the price chatacteristics like trend, reversals and consolidations still seem to be there. I'd like to hear from folks who have seen such market changes evolve and stay, as to what those are and how have they adapted to those changes?
Good post. Yes markets do NOT change, they become more or less volatile but that's all. The only way to adapt is to use use dynamic, volatility-based stops/targets. I lost a fortune in the Forex market during the extremely volatile year of 2008, because I insisted on using static (fixed) stops.
People laugh at me when I say the market HAS to work a certain way.. I will tell you this.. the market isn't random at all..There are certain patterns that will ALWAYS appear in the market.. The market is a big business that's run a certain way.. Its built in a way that it's pretty hard for an average Joe to figure out. So that being said, the market won't change because the failure rate is so high that it wouldn't make sense for it to change. The more people failing the more money the big guys make..
Yes, exactly what folks are talking about when they say "markets have changed" usually involves issues with volatility and volume. Yet, the info behind the changes is what these same folks (including myself) see as the causes of the changes. Those reasons are consistently changing. The issue is that the change has a direct impact on how a person trades (reacts) to these changes because they often do (will) impact the bottom line for our trade results (good or bad). By the way, some folks are blind to change or have problems understanding the word "change". One year a guy said the markets never changes but I notice he wasn't trading the same markets as he did in prior years. I asked him why did he "switch" markets (notice how I didn't use the word change). He responded by saying the other markets were not trending anymore like they use to and that prompted him to trade different markets that were trending in a way that he's able to trade profitably. Anyways, I can think of hundreds of examples of conversations with folks that say markets never change when in fact they themselves have made some sort'uv an adjustment in their trading because of the change. Now I'll give you specific changes in one particular trading instrument that has dramatically (not a little bit but a lot) impacted the behavior of the price action. The Russell 2000 Emini ER2 futures traded on the CME for many years...a very volatile trading instrument with strong trends or strong directional continuation price actions. Later, the ICE exchange buys it and it becomes known as Emini TF futures. 1) Fees jumped dramatically for trading it after it switch from CME to ICE. The cost for trading it becomes a big issue for small players. 2) Volatility got killed and its trend duration was cut in 1/2 when it switch from the CME to ICE. 3) For a day trader, a runner was about 15 points prior to switching from the CME to ICE. Now its around 6.5 points. 4) Correlation has declined in markets its highly correlated with. 5) Institutional players are different in comparison to the past. 6) Russell Reconstitution (additions/deletions every year) 7) Since its birth...the Russell volatility changed dramatically (good or bad) during every market crisis. My point with the above different types of changes in just one specific trading instrument is that there will always be a trend, consolidations, low volume, high volume, low volatility, high volatility or any other type of price action description that's commonly known...these things will NEVER change as in that they will always occur. Changes exist in the markets and its one of the big reasons why our profits or losses changes every day, every week, every month and every year. More importantly, we as traders "change" via making adjustments in our trading in reactions to these changes in the markets. Fear, greed, human nature...call it whatever you want. Sometimes change is good...sometimes change is bad.
Good observation !! I agreed all of them, especially point (3) ! My only question is point (5), how you know the institutional players are different now ?