Just as things start to get really good, they eventually reach a climax.
And all good things must come to an end. So even if you'll see your best returns in this market cycle... That also puts you at the point of maximum risk.
Where's The Point of Maximum Risk?
This is where you have to keep your eyes peeled but you won't have to look too deeply because nobody can escape euphoria in the market cycle.
It brings about a certain hysteria that's just in your face.
You will hear it from your fellow traders, the news, and even people you know who don't care about financial assets.
This is when people literally jump on the figurative bandwagon.
But the bandwagon can only hold so many investors trying to catch the same ride. It eventually breaks down.
So look for signs of greed and stupidity among your fellow traders.
Lookout for the traders that make reckless decisions trying to get in on a certain security because it's going up...
"I maxed out my credit card to buy bitcoin!"
"I took out my mortgage to get in on this!"
If you see anyone do this, you might want to get off the ride before it gets unsafe.
Stick to Your Trading Plan and Strategies
Remember that bulls make money, bears make money but pigs get slaughtered. You should never let yourself be swayed by the hype or greed that comes with euphoria.
It's important that you stick to the parameters you've set for your trade no matter the emotional cycle it's in.
If you entered at a certain position size. Stick with it.
If you were looking for certain indicators, follow them.
If you hit a calculated range or threshold of a desired return, exit.
If you find yourself thinking:
- I'm going to be rich
- I should take that vacation
- I'm a freaking genius
Then just try and bring yourself right down to earth. It's fine to feel euphoria but that doesn't mean you should lose your head. You've enjoyed your ride to the very top but now it's time to plan your safe exit.
No comments:
Post a Comment