Market Meditations | March 23, 2021
Chasing the trend is cool but if it’s the serious gains we are after, we need to aim for MASTERY over trading and investing ?
Today, we explore Mastering Market Cycles:
What are the main cycles every market goes through
How to identify where we are in a cycle
Using this information to profit as traders and investors
As usual, you will also get your daily dose of the hottest crypto market news and developments ?
Read, enjoy and share with your network. Let’s all build wealth together.
Crypto. Altcoins stole the show this fine Tuesday. Theta Network’s token enters top 10 cryptos by market capitalisation, XRP rallied following positive news in the SEC case and UNI surged 8% in minutes due to launch of v3 (more on this later?).
Legacy. U.S. equities were mixed today, as investors weighed optimism over economic growth with concern that rising virus cases and a lockdown in Germany signals the global reopening will be delayed.
Delighted to say this article is brought to you by FTX?. Right now I’m earning up to 100%/year lending on FTX and it’s backed by their insurance fund… One of my favourite ways to make money in this market, make sure to my ? link ? to get a discount.
Master Market Cycles
Today we talk about Mastering the Market Cycle, with the help of Howard Marks.
1️⃣Tendencies Over Certainties
We begin with a very simple but grossly overlooked point: there is no certainty in the market, only tendencies ? The best we can ever hope to achieve is an assessment of what is more likely to happen. Let’s say there are 100 balls in a jar, some black and some white. Which colour should you bet will come up?
If you don’t know anything about the contents of the jar, betting would be just a matter of guessing: uninformed speculation ❌
What if you had some special insight regarding the contents of the jar? Let’s say, you know there are 70 black balls and 30 white. That could allow you to win more often than you lose ✅
It’s important to remember that, even with your superior insight, you still don’t know what is going to happen. Even if the ratio is 70 black to 30 white, you still don’t know what colour the next one picked will be.
But all this being said, there doesn’t have to be certainty in order for the game to be worth playing.
Whilst certainty is unachievable, a knowledge advantage regarding the tendencies is enough to create success in the long run.
2️⃣The Nature of Cycles
Most people think of cycles in terms of a series of events. The events in the life of a cycle shouldn’t be viewed merely as each being followed by the next, but – much more importantly – as each causing the next.
A cycle oscillates around a so-called secular trend (a midpoint or something that can be viewed as reasonable). The stock-market secular trend is rising and is made up of the underlying growth of the businesses and their dividends.
? The movements of cyclical phenomena can be understood as taking place in a number of identifiable phases:
a. Recovery from an excessively depressed lower extreme or ‘low’ toward the midpoint
b. The continued swing past the midpoint toward an upper extreme or ‘high’
c. The attainment of a high
d. The downward correction from the high back toward the midpoint or mean
e. The continuation of the downward movement past the midpoint, toward a new low
f. The reaching of a low
g. Once again, recovery from the low back toward the midpoint
h. And then, again, the continuation of the upward swing past the midpoint, toward another high.
3️⃣Putting It All Together
There are two steps to identifying where we are in the market:
Are valuations excessive? If there are no deviations from the perceived ‘fair value’, the market is not excessively high or low.
How is the investing community acting? Determine how other investors feel about risk.
These then form the basis of a few things to look out for in trying to determine whether the market is excessively high or low.
These are not scientific or quantifiable ❌ Otherwise, everyone would be able to do it and there wouldn’t be as much profit to make.
If you believe the market is excessively low and there is a tendency for a positive outcome, one option is to make your portfolio more aggressive: risk more capital, hold lower market cap companies, make investments that are highly dependable on good macroeconomics or use financial leverage.
In an excessively high market we may decide to adopt a defensive portfolio: opt for more stable assets, diversify, buy more established companies that aren’t cyclical and stay away from leverage.
? Why stop at Mastering Market Cycles? Join our community to gain mastery of ALL things relevant to trading and investing?
DEFI NEWS & ANALYSIS
Uniswap: 4000x More Capital Efficient
The third iteration of the market-leading decentralized exchange Uniswap is coming this spring, according to new details of the so-called v3 launch published today ?
UNI, the native governance token of Uniswap, surged immediately after the announcement ? Likely due to the capital efficiency that the upgrade will create: At the heart of the upgrade is the ability for liquidity providers to make markets within customised price ranges, an approach dubbed concentrated liquidity. LPs are responsible for placing their assets into liquidity pools, against which Uniswap users trade. This is comparable to Wall Street market makers, who provide liquidity and thereby help traders move in and out of positions.
News of this launch adds to previous positive developments that have generated UNI’s massive rally in the past two months:
✅ Coinbase’s planned IPO in the U.S. market has caused the rerating of exchange tokens and AMMs
✅ The overall increase in interest in the DeFi sector has pushed up the valuation of major AMMs, including Uniswap and SushiSwap.
As traders, we use percentages in our technical analysis. But how well do you actually understand them? Find out by seeing if you can solve this puzzle:
“20% off everything!”, screamed the Market Meditations Yogi. I paid £60. What should I have paid before the sale?
Scroll down for the answer?
CRYPTO NEWS & ANALYSIS
The “Thrill of Investing?”
The U.K. Financial Conduct Authority (FCA) recently published research indicating that thrill and “status from a sense of ownership” is shifting today’s investing landscape, driving younger people towards “higher-risk” investments.
1️⃣According to the FCA research, [younger people] are more heavily reliant on social media platforms like YouTube and Twitter for investment information. ?
The thing to remember about Crypto Twitter is that anybody is able to sign up for a Twitter account and begin posting investment advice. It is dangerous to blindly copy traders based on something you heard on Crypto YouTube or a chart published on Twitter. Think of your social media feed as a place to find information to supplement your trading ideas, for example potential setups if they align with your trading system, coins to add to your watchlist, or education. ?
2️⃣Research showed that 4/10 people surveyed do not see “losing money” as a risk whilst investing and that approximately 59% of those who do invest cannot withstand the financial setback if an investment ?goes wrong.
We’ve spoken about risk management in this newsletter several times: the most important thing to remember is that a trader’s first job is to stay alive to trade another day. Even if you have ten profitable trades, if you do not implement effective risk management, one bad trade can wipe your account. Check out our FREE Risk Management ?tutorial ?on YouTube!
If it’s 20% off and you payed £60 then:
80% = £60
20% = £15
100% = £75
Gaining 1 Million Followers with Maren Altman
@marenaltman is a financial astrologer who has gained over 1 million followers across TikTok, Twitter, Instagram and more.
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Disclaimer: The content in this newsletter is for informational purposes only. Nothing in this email is intended to serve as financial advice. We are not financial advisors. Every investment and trading move involves risk. Do your own research when making a decision.