Take a look at the financial news and you’ll see regular record highs within the stock market. That’s great, but I’m not cheering and partying because I know that markets can change at any time.
And that brings up an important point: adaptability. Whether you’re trading blue chip stocks or benefits you need to be able to adapt.
So these are the things I believe every trader needs to know about adaptability.
Waves Don’t Last Forever in Stock Trading
Do you remember the uproar over Bitcoin? The people’s currency was once considered to be something that would enter the mainstream market. One quick look at the headlines and we know that Bitcoin has now hit its lowest price in over a month.
But that doesn’t mean you couldn’t have made money from it. The difference is smart traders had already departed from the currency. The same goes for any stock.
Just because you’re succeeding doesn’t mean that you should assume it will last forever.
Understanding the Political Environment
Politics is something that always influences business. I’ve seen more businesses than I can count go under simply because of politics.
Take the budget airline Monarch and its recent bankruptcy proceedings initiated after Brexit. A single political change helped to destroy the business through declines in currency and worries over the fate of budget airlines flying out of the UK.
I believe one of the keys to adaptability in the stock market is to follow politics carefully. Major decisions can flip the market environment on its head.
Dealing with the Unexpected
I recently wrote about gun control after the Las Vegas shooting. It gained me a lot of heat from people opposed to gun control. Whether I was right or wrong doesn’t matter. The point is that this mass shooting was completely unexpected and the market reacted to that.
In reaction to the tragedy, Shotspotter Inc., which uses a network of audio sensors to determine where and when shootings take place, spiked 50%.
I wrote about a controversial problem my students have, and I discussed the need for rules to provide an outline for your penny stock trading strategy.
This is how you defend against unexpected changes in the marketing environment. Whether it’s the legalisation of marijuana or a ban on e-Cigarettes in public places, a solid trading strategy will ultimately protect you against events you can’t anticipate.
Adapting to the Stock Market
Nobody can guess the market. I have never been able to guess the market, even though I’ve been able to make a profit from intelligent penny trading.
By trading to a specific strategy and sticking to that strategy you can make sure that you adapt to markets and protect against sudden and unexpected changes in the trading environment.