“If you see a fool in the market, it is most likely you yourself.” These words belong to W. Buffett. How fair they are and, if interpreted correctly, how useful they are in trading. Because, even in a bull market, people often lose deposits. Let’s talk about this today.
We are now in a very dangerous phase of the market, I will just say, so as not to inspire fear, we are at the highs. Where are the highs? I will list the main tools, they are as follows:
- Indexes of America. All major indices sp500, Dow Jones, Nasdaq. They are all at their maximum values. For a minute, America is the planet’s premier market in terms of scale and capital intensity and market capitalization. And she is on the highs. The trend has been going on for a very long time and it goes exponentially. Imagine the temptation for those trying to guess the pivot point? After all, there are definitely analysts and traders who bet against growth simply because they believe that all those who are buying America now are just fools. And the higher the trend rises, the more such analysts and traders are betting on the reversal. But notice, the trend is not going away, and it is even accelerating on a large scale, placing the “smart and discerning” bets against themselves.
- German index DAX 30. The main industrial index of an industrial country, I apologize for the tautology, on their highs. There is no doubt that the temptation to short it up is very great, because it will be very far from the bottom. But the trend, although it can be corrected to the support level, will continue further.
- Russia. MICEX Index. It is also very close to its historical highs. Plus, do not forget that we have quarreled with the whole world, we have a lot of problems within the country, our carrots are more expensive than bananas, you see, our GLBT-Schnicks are oppressed, we have Crimea and all Ukraine and Syria. Hence the disgusting geopolitical situation. The article is not enough to describe everything where we are bad. And the index is at the top. How is this possible? There is clearly a fool sitting here and holding the entire Russian fund. It is this fool that we will shortcut, many people already think. Because how not to think about it, if there is so much negativity around.
And now I turn to the main point, the question of the “fool” in the market is not a question of guessing the direction of the trend, as it might seem at first glance. The “fool” question is the task of not doing what makes you to such a status. Or, on the contrary, do what will not allow you to be in it. And there are only three such actions (according to my attitude to the market):
First, to correctly assess the general conditions, or as I often say, to correctly assess the “wind direction”.
Second, do not exceed the risk for any, even the most promising, patterns.
Third, it is correct to look at the market as a way of saving, but not earning.
And finally, fourth, not even think about such a temptation as looking for a “fool” in the market, remembering the words of the greatest investor in history.
Today is the closing of the month. An important day for the markets, or rather for those who analyze and evaluate it, that is, for you and me. Therefore, let the end of the month be promising for your instruments.
With you was Alexander Perfilov, the author of the telegram channel “Market Look” @perfilov_invest
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