Risk and Opportunity; When To Buy & When To Run

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Risk and Opportunity

Risk and Opportunity; Investing is analogous to war

One needs to understand the difference between a battle and a war. You can lose several battles but still win the war, or win many battles and still end up losing the war. It comes down to how much damage you incur as opposed to losing or winning the battle. If you minimise the damage, you can lose several battles in a row, retreat and regroup and come back and win the war.

Bullish and Bearish cycles are akin to battles fought in a War

Each cycle should be considered a war, and as long as you win the war, the individual battles are meaningless. The mass mindset focuses on each battle, students of mass psychology focus on the war.

When it comes to investing one can experience extended periods of success, where the markets do exactly what they are supposed to do, but the equation must balance and sooner or later the market will go through a phase of turbulence. In these turbulent times, like the current one, we will experience more losses, but when the turbulence vanishes, the win ratio and the percentage in gains will be far higher than experienced during the phase of turbulence. Until October we had a remarkably long winning streak.

Every bull market goes through one shakeout (strong pullback phase)

One never know when that will occur exactly. A shakeout is not the same as a market putting in a long-term top.  This is done to get the masses to alter their perception. The big players need someone to sell these stocks to before they cash out.  The masses eventually buy this strategy, and when they do, the top is usually close at hand. Once again, look at Bitcoin, everyone was happy when it traded past 10K, they turned ecstatic when it broke past 15K and then they assumed that nothing would hold it back.Opportunity

During this shakeout stage, it is essential to have stops in place and deploy one’s money at different intervals. Nobody can change this order. No one can tell with certainty when the markets will experience a stronger than normal pullback because this market is as manipulated as they come; after 2008, free market forces ceased to exist.  However, if the trend is positive, then those pullbacks have to be viewed through a bullish lens.

The following inferences are therefore possible:

In times of risk, the masses seek to take on more risk as opposed to taking on less risk. The masses beg for the opportunity to buy low and sell high, but when the moment finally arrives (and the risk factor is much lower) they baulk, and their argument is always the same “it is different this time, the market is going to crash, and we need to bail out”. However, they never put forth the same argument when the markets are racing upwards, and analysts all over the place are issuing insane targets such as $1 million, and they now assume the next stop is the sun or another galaxy. Instead, the next stop is usually “hell”.

Run when the Masses Turn Euphoric

bitcoin

When the masses believe they have found the next best thing to white bread, its time to head for the hills. Case and point Bitcoin. Throughout its fall, the masses remained bullish, and despite the heavy beating it has already taken experts are still issuing insane targets even now when Bitcoin is trading below 5K, which means that Bitcoin the odds of it hitting 3K are far higher than 15K.

Imran Wasim, a financial analyst at AMSYS Group, told News BTC he was far from downbeat, predicting cryptocurrency will become “more mainstream” in 2018. https://bit.ly/2DZs7fo

Bitcoin Price Forecast: Tim Draper Predicts Bitcoin Will Be Worth More Than $100,000.

Llew Claasen who is the executive director of Bitcoin foundation recently stated that he expected Bitcoin to hit $ 40,000 by the end of this very year. He further added that 90% of the cryptocurrencies will actually fall. https://bit.ly/2FHTVX0

Tom Lee, co-founder of Fundstrat Global Advisors, lowered his year-end target to $15,000 from $25,000 — still well above where the cryptocurrency was trading on Friday.

A key driver was bitcoin’s “break-even” point, the level at which mining costs match the trading price. That level is down to $7,000 from an earlier estimate of $8,000 for the S9 mining machine by Bitmain, according to Fundstrat’s data science team. Based on that, Lee estimates that fair value for bitcoin would be roughly 2.2 times the new $7,000 break-even price. https://cnb.cx/2BhvnQD

Alexander V. van Dijl, Financial expert:

At the beginning of this year I predicted a bitcoin value of 150.000. While that seems like a lot today, I believe some firm price movements will take place in the (very) near future. Something big will happen, perhaps a large retailer will accept bitcoin, perhaps adult advertising will accept bitcoin as payment. Something big will happen that will cause the price to skyrocket again. 150.000 is my prediction for January 1st

Eric Brown, Founder and CEO of Aliant Payment Systems:

My Bitcoin price prediction for 1 January 2019 is $23,000.We were practically at this price once, and we know what it takes to get it back there. We are very much in the infancy of this type of currency, and as technology grows, so does the value of the currency. The future is technology and Bitcoin is the currency of that technology.

Sam Russell, Co-Founder / EVP Strategy and Innovation at WORBLI:

If the fundamentals on Bitcoin positively change in September with the upcoming proposals for an ETF approval by the SEC, we can expect buying pressure to increase pushing price up to previous market structure highs of $11,400 testing resistance in that area. Should that happen, Bitcoin would effectively change in trend. My guess — 17,000 USD https://bit.ly/2wJoUu8

The sensible thing to do is to implement a strategy that works both in good times and turbulent times, and that is what we are doing.

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The Ideal time to Buy Stocks is when the Masses are Panicking (Oct 27)

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Stock Market Bull 2018 Still In Play; Buy The Dip (July 15)