Market cycles
Investing as a general concept is cyclical. We go through the ups and downs of trending markets.
But what does that actually mean?
Everything in this world is cyclical from seasons to harvests to birth cycles. It has a beginning, and over time, an end.
Products and services all have life cycles depending on a variety of factors like technology or Economic changes.
As we discussed before, risk is ultimately the highest at the start of any life cycle. The volatile nature of surviving infant markets is not easy.
But how do we know when the bottoms and the tops of these cycles are?
We ultimately don’t. There are too many unknown factors to which way the market will actually go and no one can predict short term events.
But what we can do is start to understand tools such as basic Technical Analysis to pinpoint historically over time where markets have bottomed or topped.
Ultimately all we are looking at with a chart, is the price of an asset measured in a particular currency. But price rises and falls over time, usually due to wider market fluctuations. All that is, is money flowing in and out of assets depending on what is happening in the world. These create the wave like patterns you see on charts.
Over time we can see the Market tends to retest key levels, many times over at times. So whilst you think you have missed your opportunity, you never know what may happen in the future.
The tops of cycles can be fuelled with expectation and hope. We can all see the hype when social media gets hold of something interesting, the key is to not let it get a hold of you. Doing so pulls you into the fear and greed trap. Once again objectivity rules when looking market semantics.
Grasping basic cyclical movement and understanding trends can really help in adding skills to protect you. By learning to position within longer trends we can learn to have patience with the market.
