Speculate Guide (not real advice, see disclaimer)
“...time was not passing...it was turning in a circle...”
― Gabriel García Márquez, One Hundred Years of Solitude
It may not be appropriate to use literature as a metaphor for the market, but investors who have stayed in the market long enough will find that all this seems to have happened. Yes, history repeats itself, but each time it's a little different. Wall Street analysts often overlay stock charts of each bubble and find similarities.
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Figure 7: The index for the 1980s is
Standard and Poor's 500. The data for the 1920s is found in the Board of
Governors of the Federal Reserve System (1943).
According to the previous analysis, some guides can be found. 1. Looking for bubbles
Use the Bubble Triangle to judge whether the factors that form the bubble are complete, combine with previously discussed features. Economic, new tech, finance change, policy & media, short selling, optimism, etc. For an asset to become a bubble, it needs broad public participation, and it needs to pay attention to things that attract everyone's interest. Dogs and wine will vary from person to person, and many people do not have the habit of drinking tea, which means these bubbles can only occur in specific areas. It generally takes about 3 years. Surprisingly, with the development of communication technology, the duration of speculation has not been shortened. There are reasons to think that this is related to human psychological characteristics. 2. Take your position based on rationality Don't use leverage. Daniel Kahneman and Amos Tversky(1979) stated most people make economic decisions not based on expectations theory but on their attitudes towards winning and losing. But the game is a logical game. Think about people who receive margin calls on the Bitcoin platform. Although leveraging your investment portfolio will make your wealth grow faster, a small drop may cause you to die before dawn, and at the same time, your psychological pressure will be greater. The best way is to make a good allocation of available funds. 3. Find the right time to exit Talk to your friend, browse investment websites, see what they are thinking. Peter Lynch's cocktail party theory can give some guidance. Leave when everyone is dancing. They are summarized as follows,
Everyone has a different attitude towards speculation, so this may not be the way for you. Everyone should consider a long-term holding strategy. Disclaimer The author wrote this article for academic purposes only, and should not be regarded as any type of investment advice or invitation. The author has not registered financial professional qualifications in any country or region. Anyone acting on the advice of this article does so at their own risk. |
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