“Don’t Confuse Brains With a Bull Market”

September 19, 2016-5:10 pm Stevie The Entry Points Market Blog 0

An addendum to a previous quote of the day  by Humphrey Neill: “Don’t confuse brains with a bull market.”

 

Call me Mr. Obvious, but I would add this mouthful: In an UPTREND/bull market, we want to (ideally) enter our initial position as close to the bottom price/time as possible. And we want to (ideally) exit our position as close to the top price/time as possible. So is this even possible? At first it’s a tough endeavor. But if we’re stubborn and tough and we keep learning, we can get pretty good at it. A select few even get great at it. But if we can be consistently pretty good at it, then there’s a pile of money over there waiting for us. And, even more importantly, we’ll have a good chance of keeping most of those profits.

A couple of things to hopefully pique your interest in getting better at this:

 

#1: We need to learn the power of ACCUMULATION (and DISTRIBUTION) and then learn to respect that power. It’s what people are referring to when they say a market is “building a base”. It’s the bottoming process necessary for all powerful up-moves. It’s what gives us the staying power to withstand the inevitable selling waves in all bull markets.

 

#2: We need to learn what ENDING ACTION is in markets. They are the warning flags that a TREND may be coming to an end. I said may because just to throw us off, ENDING ACTIONS can be just a warning that the TREND needs a pause to refresh – called REACCUMULATION and REDISTRIBUTION. And over time, with hard work, we can get better at understanding the differences that exist between ENDING ACTIONS that warn of a major top from those that warn of a shorter term top. ENDING ACTIONS are things such as SELLING or BUYING CLIMAXES.

 

#3: We need to understand the herd mentality, as so brilliantly laid out by Charles MacKay in his book “Extraordinary Popular Delusions and the Madness of Crowds”. We need to learn how to judge fear and then to use that to our advantage. We can then learn to step up and buy into the volatility, when the market is very scared and when folks are morose.

 

#4: We need to learn how to understand/recognize what are the SUPPORT and RESISTANCE areas. And then learn to respect their power and to use them to enter (and exit) our positions.

 

And lastly (for this discussion now), we need to do as little: thinking/figuring out/guessing/predicting as possible.

But we need to do a tremendous amount of: reading (the “right” things)/learning (the “right” things)/planning/preparing/staying mentally tough/anticipating (acting, but not reacting) as possible.

 

And the Tischendorf Letter has a great, fun passage from the extraordinary book about Jesse Livermore, “Reminiscences of a Stock Operator”  by Edwin Lefevre discussing some of this. 
 Originally published on One Radio Network

 

 

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