Bear Bull Trader: Embrace the Bull, Escape the Bear

Bear Bull Trader: Embrace the Bull, Dodge the Bear

May 15, 2024

There is no such thing as a Bear Bull Trader, but a hybrid mix like this would create one of the best trader mindsets. Such a trader would not be limited to seeing only half the equation but would look at the whole picture. However, there is an even better option: the trend trader. A trend player looks for the next emerging trend and seeks the best stocks in that sector. The idea is to play the trend in its entirety. To do that, you must understand mass psychology.

Do Stock Market Bears Have Valid Arguments?

Yes, they do to some degree; the economy is in trouble, everything is being manipulated, and so on. Are we discounting this? Yes, we are. Positive and negative arguments regarding the market have one thing in common: they are usually overblown on both ends of the spectrum. Today, the goal is to be bombastic and pass off exaggerations as facts.

On any given day, you can find multiple reasons the markets should soar or crash. After observing the markets for many years, these scenarios amuse us. For us, mainstream news is where we go when we have nothing better to do or are looking for alternative ideas. In other words, we go to mainstream sources to discover what we should not be doing. Euphoria and fear are the same things as they both represent extremes; history and science both show us that an extreme state does not last for long.

Bear Markets Equate to Opportunity

A reversion to the mean is inevitable as this is the preferred state of any living thing, whether they are aware of this or not. When markets enter the feeding frenzy stage or the crowd is euphoric, the end is always near; there has never been an exception, and there never will be one. The same applies to panic; it does not last for too long and ends much faster than most individuals believe.

It feels longer for most because it takes time to snap out of this panic, but the actual transaction is over rather quickly. This is why this bull market remains the most hated bull in history. The crowd and the experts cannot fathom why, against all this backdrop of weakness, high unemployment (forget the manipulated data, the BLS issues), and almost no real growth, this market continues to trend higher.

Perceptions Are Dangerous

Welcome to the world of mass psychology, where perception is the only thing that matters. What you think is real is not, and what you feel is not is real; sounds crazy, right? It is crazy, and that is the market for you wrapped up. The markets are driven by greed, lust, and cruelty. We focus on the trend, not positive or negative news or states of mind.

Positive and negative are perceptions. A rainy day is terrible for one person, yet a gloomy rainy day is a beautiful event for another. Who has the correct viewpoint? The psychologist will have you believe that being an optimist is the way to go. Rubbish, we say; this kind of claptrap is for those who seek no improvement.

Focus on the Trend and Ignore Bull Bear Market Hype

If you take the observer’s perspective, both viewpoints are wrong, and here’s why. A day is a day with or without you. You attempt to change the situation as you have been placed into the equation with your distorted views. Now, the day has to have some colour added; you decide to view it as positive or negative. The reality is, who cares what you think?

The day goes on with or without you. It’s not good or bad; it just is. You are the problem as you add an unnecessary perspective, one that prevents you from seeing what is going on. Most individuals do this when it comes to markets. They run to news outlets looking for clarity but walk away with a distorted view of what is going on. Focus on the trend, as everything else is your enemy.

April 2018 Comments on Being a Bear Bull Trader

Today’s markets are following patterns similar to those of 2003 and 2009. In other words, the patterns are more indicative of bottoming action than topping action simply because the markets were hated for most of this bull run.

Investors did not want to allocate money to this market, so in some ways, this could be viewed as the first leg of the bull run that the masses will eventually embrace. At this stage of the game, we would not be worrying about a bear market, for market sentiment is still too negative, and there are many positive factors, one of which is the massive tax cuts that will provide the energy for this market to run higher. Secondly, even though the Fed has decided to raise rates, interest rates are at historically low levels, and they would have to rise significantly before they have any impact on this market.

Lastly and most importantly, the trend, as per our trend indicator, is still positive, which means every pullback has to be embraced regardless of its intensity.

The Wisdom of Jesse Livermore and Solon

Jesse Livermore, a legendary trader, emphasized the importance of understanding market trends and mass psychology. He noted, “Markets are never wrong; opinions often are,” highlighting the need to let the market confirm any trading thesis before acting. Livermore’s success during the Great Depression, where he made $100 million by shorting the market, underscores the importance of understanding market trends and investor psychology.

Solon, the Athenian statesman, believed that true happiness and success come from living a balanced and virtuous life, not from reacting impulsively to external events. Solon’s advice to Croesus, who later acknowledged its wisdom, underscores the importance of long-term thinking and resilience in facing adversity.

The Value of Mass Psychology and Technical Analysis

Mass psychology plays a crucial role in market dynamics. Investors’ emotions and behaviour significantly influence market trends. Understanding the masses’ state can help identify potential market trends and make informed investment decisions. For example, when the masses are euphoric, it might be time to be cautious; when they are fearful, it might be an opportunity to invest. This principle, contrarian investing, is closely tied to mass psychology.

Technical analysis, on the other hand, provides a systematic approach to understanding market trends. By analyzing price movements, volume, and other market indicators, technical analysis helps traders identify patterns and make informed decisions. Combining mass psychology with technical analysis provides a more comprehensive view of the market, assisting traders in filtering out false signals and enhancing the profitability of valid signals.

Focus on the Trend and Ignore the Noise

Combining the wisdom of Livermore and Solon, we see that successful investing requires a blend of practical wisdom, long-term thinking, and emotional resilience. Investors can turn panic-based selling into opportunities for significant gains by understanding mass psychology and maintaining a disciplined approach.

Perceptions drive the markets, and these perceptions can often be misleading. By focusing on the trend and ignoring the noise, traders can make more informed decisions and avoid the pitfalls of emotional investing. This approach is not only more rational but also more profitable in the long run.

The Role of Historical Figures in Shaping Investment Strategies

The Medici family, known for their banking prowess during the Renaissance, understood the importance of diversification and long-term thinking. Their success was built on prudent financial management and strategic investments. Similarly, the Rothschilds, one of history’s most influential banking families, emphasized the importance of information and timing in making investment decisions.

These historical figures provide valuable lessons for modern investors. Traders can develop a more robust investment strategy by combining the Medici family’s strategic thinking with the Rothschilds’ information-driven approach. This strategy should be based on a thorough understanding of market trends, mass psychology, and technical analysis.

The Importance of Adaptability in Trading

One key lesson from historical figures like Livermore, Solon, the Medici family, and the Rothschilds is the importance of adaptability. Markets are constantly changing, and successful traders must be able to adapt to these changes. This means being open to new information, adjusting strategies as needed, and staying disciplined in the face of market volatility.

Adaptability also means recognising when a trend is changing and taking appropriate action. This requires a deep understanding of market dynamics and the ability to interpret technical indicators accurately. By staying adaptable, traders can navigate the complexities of the market and capitalize on emerging opportunities.

Conclusion: Bear Bull Trader

Combining trendline investing with mass psychology offers a balanced approach to market analysis. This strategy considers both the technical aspects of the market and investors’ emotional states, leading to more informed and potentially profitable investment decisions. By integrating these two powerful tools, investors can navigate the complexities of the stock market with greater confidence and precision.

The wisdom of historical figures like Jesse Livermore, Solon, the Medici family, and the Rothschilds provides valuable insights into successful investing. By understanding market trends, mass psychology, and the importance of adaptability, traders can develop a more robust and effective investment strategy. This approach enhances profitability and helps traders avoid the pitfalls of emotional investing and make more informed decisions in the long run.