According to George Soros’ investment advice, whodrivesthemarket.com proposes the following adaptive trading strategy depending on the current market participants’ crowd behavior that drives the market. That is, with respect to the currently prevailing (dominating) trading strategy in a market, as estimated and published on whodrivesthemarket.com, the following adaptations to your own strategy seem reasonable.

Crowd behavior: LOW fraction of chartists (<20%)

Example figure

Market assessment
Business as usual. Rational investing reigns based on fundamentals. No exaggerations. Safe waters.

What to do best?
Chartist strategies such as trend following work best in this scenario. This is as best as it gets, as changes are high that persistent price trends develop. A good scenario for long term investors.

Crowd behavior: Fraction of chartists is RISING from low level – A) due to price bubble

Example figure

Market assessment
As chartists exploit trends, their strategy reinforces the trend, thus attracting more and more chartists. A self-fulfilling prophecy develops, resulting in a price bubble.

What to do best?
The trend is your friend. The trend gains momentum in the already prevailing direction. Profits of trend following strategies rise sharply.

Crowd behavior: Fraction of chartists is RISING from low level – B) due to a crisis

Example figure

Market assessment
A quick and very sharp correction, inversely to the previous market trend is induced. Causes are crises and crashes.

What to do best?
Bad times for long term investors. Short term investors on the right side of the market can make quick profits but also need to get out quickly.

Crowd behavior: HIGH fraction of chartists (>50%)

Example figure

Market assessment
Exciting times, the market is quickly changing its mood and price direction. Chartist patterns in prices have disappeared.

What to do best?
Keep your hands off.

Crowd behavior: Fraction of chartists is falling from high level

Example figure

Market assessment
The bubble has burst / the crisis is about to cease. The price trend has changed its direction, as fundamentalists drive prices back to fundamentals (either up or down).

What to do best?
A fundamentalist strategy seems appropriate. Also, in the settlement of this phase, starting to follow the correcting trend that fundamentalists have induced is viable.