We've all dealt with varying levels of market insanity over the past several years. Going back further than that, if you were around for the financial crisis or dot com debacle, you know how crazy markets can get.
While the market of 2019 doesn't possess the same levels of blood lust you find in bonafide bear markets, the current market environment has a perversity all its own that is unique to this time period.
As investors we are dealing with sets of fundamental, event-driven circumstances that are instantaneous in their delivery through various social media outlets.
We are witnessing policy decisions being made on the fly and announced on a whim.
We are subject to varying degrees of political and geopolitical crisis that change by the day.
It's no wonder then that investors have simply given up on gaming what the market will do from here. It has become an exhausting process that continually leads into a brick wall of nowhere.
How does an investor then deal with such a prodding enigma?
- Fluid approach
- Situational awareness
- Understand the dynamics of risk/reward well
- Tend towards buying into strength as opposed to buying into weakness
- Stop trading or you will get churned
- Take everything you hear and see with a grain of salt except for the fact that we are in a bull market.
You need a fluid approach to deal with a consistently evolving market.
You need situational awareness to deal with the fact that whatever rules or systems you think are solid right now will be turned on their head at some point in the near future.
You need to understand the dynamics of risk/reward well because there is nothing else. If you don't understand how much risk you have in each position and perhaps more importantly, how much risk there is in the overall market, then you know nothing.
You need to buy into strength because this is a market that runs with what has been working and obliterates what has been not. Just look at all of those poor souls who kept shorting bonds this year thinking that rates couldn't go any lower. Conversely, just look at all those poorer souls who keep shorting the markets, thinking that it can't go any higher. Chumps. Don't be a chump.
The market has been going sideways for two years now. In that time, there have been pockets of months where you could trade the markets well within a definable price structure. In the pockets of time when the market puts on a different bullish or bearish mask everyday, simply stay away. It's not bull markets, it's not bear markets....sideways markets are the biggest threat to investors and traders. They bleed you to death through churn.
99% of what you see and hear on a daily basis should be ignored. Price is all that matters. The fundamental information that matters for the entire year can generally be written on a post-it note. If it's any longer than that you're overthinking and overanalyzing the situation.
And that's how you survive a market that has become maniacal....
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