The Sophistication Of Accurate Market Activity Interpretation
Perspective & Approach Are Everything
Financial markets are not for the faint of heart. Choosing to enter into this realm is a decision that requires a level of tenacity and determination that exceeds that of what many are accustomed to, or are expecting. You are most likely familiar with the famous quote by Miguel de Cervantes:
Faint Heart never won fair lady.
In many ways, financial markets are similar to a sophisticated woman. Exclusive, unavailable, and out of reach to the average man. Only an extremely dedicated and persistent pursuit can unlock the numerous safeguards she has set in place.
Similarly, if you think that a casual attempt is going to win you the favor and blessing of the market, you are quite simply, delusional. Learning to accurately interpret and read your particular market of choice is a skill that every investor will have to develop and master at some point or time in their journey. The earlier the better. Markets are famous for providing false signals. However, there is one key dynamic that will help to provide a greater level of clarity as to the legitimacy of the move.
Ignoring The Noise
False signals can also be referred to as noise. Even though noise can and does move the market, it’s important to classify these movements correctly. Essentially, noise is the result of short-term events and announcements. Noise moves markets in both directions, which ultimately works to expose it as such. Markets move in long-term trends. Noise is a short-term movement and can be utilized by traders. However, it has no lasting effect, in terms of altering the trend.
This understanding was at the heart of my warnings throughout 2022. Pumps were quite simply, bear market rallies. In other words, there was insufficient power to adjust the trajectory of the market. This was continuously highlighted in my writings. Those who got excited and bought into these bear market rallies simultaneously revealed their ignorance and lack of understanding. Ultimately, noise provides opportunities to those who identify it as such.
One has to zoom out, to gain an accurate assessment of the current trend. Once this has been achieved, market movements that are contrary to the trend can now be utilized as opportunities. For example, the bearish trend in 2022 created selling opportunities during the pumps. Subsequently, in 2023, buying opportunities are created by the dumps. There is a clear trend reversal, and until such a time as it is negated, buying the dip is the appropriate response.
Why? Because the trend and trajectory have now shifted. If the trajectory of the market was still in a state of decline, the opposite would apply. Sudden moves contrary to the trend would then be bullish moves in a bearish market. The correct approach would then be to sell the pumps, not buy the dips. It all comes down to what the longer-term trend is doing. Essentially, the effective approach is to align with the long-term trend, while simultaneously utilizing the noise.
Common Error
What new and inexperienced investors tend to do is to apply the opposite approach. These investors ignore the long-term trend while paying attention to the noise. These are the investors who continuously bought the dip that kept dipping in 2022… paying attention to the noise, while the long-term trend was clearly in decline. It’s easy to accept what I am saying now from a position of hindsight. However, it’s too little, too late.
The appropriate time to have paid attention to this information was in 2022. However, very few were willing to consider what I had to say in 2022. Once again, greed overpowered rationality. Many were unable to imagine the lows that were still to come, and so thought the dips were bargains, when in fact they were quite the opposite. Paying attention to the long-term trend is what keeps you in sync with the market. Traders, on the other hand, will pay attention to both the long-term trend, as well as the noise.
Final Thoughts
Effective investors can discern and identify trends. They understand that noise is quite simply just that, a distraction. If as an investor, you are paying attention to the noise, you are essentially distracted. Being attentive while simultaneously ignorant of the trend provides little credibility to your focus. It’s like paying attention to your speedometer while ignoring the road ahead of you.
It has the makings of a casualty. Keep your eyes on the road ahead of you. In terms of investing, this is achieved by observing the long-term trend and applying the appropriate action for the appropriate market behavior. That’s it for this one. See you next time!
Disclaimer
First of all, I am not a financial advisor. All information provided on this website is strictly my own opinion and not financial advice. I do make use of affiliate links. Purchasing or interacting with any third-party company could result in me receiving a commission. In some instances, utilizing an affiliate link can also result in a bonus or discount.
This article was first published on Sapphire Crypto.
