Why are we always in such a hurry to decide whether a sudden piece of bad news marks the bottom?
The bad news has just come out. Losses are still being assessed, and the full impact is not yet clear, but trading groups have already split into two camps: one is calling a crash, the other is calling a buying opportunity.
The investigation report isn’t even finished, but positions are already maxed out.
Waiting is uncomfortable. If you’re out of the market, you’re afraid of missing a rebound; if you’re holding positions, you’re afraid of further losses. People rush to reach a conclusion so they can press the trade button.
But after a sudden event, risk and price don’t necessarily adjust at the same time.
The first wave of selling may be driven by a flight to safety. After that, we still need to watch for liquidations of leveraged positions, outflows of funds, and whether other institutions have been affected. Even a single strong rebound candle may just mean selling has paused or short sellers are closing positions. We need to wait and see whether buying support lasts.
At times like this, the most useful thing is to write down in advance: What new evidence would make me change my view? Whether the situation is under control, outflows are easing, and prices are no longer making new lows on a retest are all more worth examining than simply saying, “It’s fallen so much, it’s bound to rebound.”
Missing out on the first part of a rebound can be the price of waiting for more complete information.
Rushing to take a stance first every time, however, can leave you trapped by your earliest judgment, making it feel embarrassing to change your mind or reduce your position later.
Remember: In the wake of a sudden event, those who reach a conclusion first may attract attention; those willing to revise their views as evidence emerges have a better chance of protecting their capital.
The bad news has just come out. Losses are still being assessed, and the full impact is not yet clear, but trading groups have already split into two camps: one is calling a crash, the other is calling a buying opportunity.
The investigation report isn’t even finished, but positions are already maxed out.
Waiting is uncomfortable. If you’re out of the market, you’re afraid of missing a rebound; if you’re holding positions, you’re afraid of further losses. People rush to reach a conclusion so they can press the trade button.
But after a sudden event, risk and price don’t necessarily adjust at the same time.
The first wave of selling may be driven by a flight to safety. After that, we still need to watch for liquidations of leveraged positions, outflows of funds, and whether other institutions have been affected. Even a single strong rebound candle may just mean selling has paused or short sellers are closing positions. We need to wait and see whether buying support lasts.
At times like this, the most useful thing is to write down in advance: What new evidence would make me change my view? Whether the situation is under control, outflows are easing, and prices are no longer making new lows on a retest are all more worth examining than simply saying, “It’s fallen so much, it’s bound to rebound.”
Missing out on the first part of a rebound can be the price of waiting for more complete information.
Rushing to take a stance first every time, however, can leave you trapped by your earliest judgment, making it feel embarrassing to change your mind or reduce your position later.
Remember: In the wake of a sudden event, those who reach a conclusion first may attract attention; those willing to revise their views as evidence emerges have a better chance of protecting their capital.