The Game has Changed

 | Nov 11, 2011 | 2:00 PM EST
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I miss the days when big gains like today's would generate a lot of excitement. Traders would chatter about all the great stocks they were pursuing, and it seemed like you never had enough capital to jump in them all.

Ever since the low in March 2009, our rallies have been mostly joyless and cause for complaint rather than for celebration. I often wonder if we will ever see a return to the old days, when traders stayed upbeat in a strong market and couldn't wait to load up their next good idea.

A lot of things have changed in the last few years that have greatly affected the mood of traders. The most obvious is the lousy U.S. economy. There are few who survived the crash that weren't affected by either unemployment or the horrible real estate market. When you don't have those safety nets, speculation in the stock market isn't just a form of entertainment and a potential source of some additional discretionary funds. Traders trade out of fear too often these days and are always worried about what economic disaster will befall us next.

If the economy isn't enough of an obstacle, we also have to deal with greater artificiality in the market created by high-frequency computerized trading and exchange-traded funds. The market no longer moves in a way that reflects the emotions of ordinary human beings. Prices have always been manipulated, but now bloodless machines and giant baskets of stocks move things in a way that causes frustration for the naive few who still try to apply logic.

I can go on about how the market has changed in the last few years, but it is only useful if we are going to try to figure out a way to adapt and regain the edge that used to make trading fun.

I doubt we will ever return to the way things used to be, but I believe we will see a cycle where stock picking matters again. We have to stay aware of how the environment has changed and learn to deal with it by trading market direction more, and have less confidence that good stocks will ultimately prevail. The market will continue to be a source of great opportunities for traders, but we have to change the way we deal with it to prosper. Most of us probably prefer the old days, but if we change our thinking, the new environment can be rewarding, too.

The market continues to hold up remarkably well as Friday winds down, and given the perverse nature of this action, we'll probably see a squeeze into the close to cap it off.

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