💀 Change or Die
Change or Die Charles Darwin
Survival of the adaptors
Any edge in the market you have now might not be there next year. Markets become more efficient and as a result any edges (imbalances in the prices) where you temporarily can make money become obsolete.
To ensure you can survive these changes you need to:
- Acknowledge it
Accept that the edge you have now might not be here next year. Knowing when the edge has disappeared vs. temporary stagnation is something you know only when you have intimately traded your system for a long time. To deal with temporary stagnation periods, I use my Drawdown review and ask questions about my own performance first. I will always assume that it is my fault before blaming the disappearance of edge. The disappearance of the edge is a far rarer occurrence but it can happen. When I see that my drawdowns are nothing to do with me and they are longer than expected and happened before, I start to investigate what could have happened. - Re-frame it.
Don’t be a floor trader from the 90’s who mourns about electronic trading and gives up. View the change as a great opportunity to evolve and grow as a trader. If you can build a framework that allows you to discover new markets, new methods, and strategies, this will give you huge confidence in your trading career which you can do for the rest of your life. - Prepare for it.
Before your edge disappears, ask the questions - what could happen? What changes in the next 1-5 years can happen that could make my edge disappear?For my current edge -- Bitcoin could become less volatile so the big moves and big R trades could disappear.
- Bitcoin could become more institutionally traded as a Spot ETF is introduced. The institutions will bring more liquidity and as a result, the volatility will drop. Also, the institutional traders are very sophisticated so I expect trading to become much harder and similar to Equities or Gold trading. However, I must also consider that more sophisticated traders mean cleaner technical trading.
- The costs will reduce so I could be trading more technical patterns such as double tops and bottoms and ranges for smaller R. So I must explore trading strategies with smaller R targets.
- Research
While you are trading, you are always asking questions. Is there a way I could have traded this?So in a way, all your research is preparation work for the new edge.If things really get tough on Bitcoin - look at other markets, Equities, Gold, Oil, or even good old FX. - Relapse
Don’t underestimate the work and time that will be required to make the changes and be successful with them. I have traded one way for more than a year so to change the approach does take time. Don’t mistake the relapse, which is a normal part of any new process, for a setback or failure.Follow this framework and you will be able to survive and adapt to any market changes.
