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Friday Feature: Thriving in Bear Markets(Part 1) Understand the Bear Market Psychology

April 22, 2020

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The more I trade, the more I realize the specific actions I practice in trading is a very individualistic practice.  Everyone has a different approach, system and rules that works for them.  What’s important is for you to know what works for you on a consistent and evolving basis.  Compare to the masses, you are always positioned counter intuitively.  This is where the joy and challenge sets in. 

In every industry, and every occupation, the successful top 1% performers are the ones that set themselves APART, NOT the ones that just follow the herd and become mediocre. Bear markets test this especially vividly.

Given the fact that we just had one of the worst unemployment data in history and the market just went up today (4/2/2020), where do you think the market psychology is at today?  In addition, we had so many news articles advocating for buying the bottom, which I almost use as an inverse sentiment indicator.  Do you think you should do what the masses is trying to have you do?

For those that think the market has bottomed, I don’t know if you are right.  I only trade one chart at a time.  From a psychological perspective, the true bottom of a bear market is not hope, the true bottom is when everyone you know, every news media and every channel is stating absolute depression, despondency or loss of hope.  Its in those darkest moments, you know you have reached the bottom and its time to asses a real long term upside.  Do you think we are there today?

If I had to define where we are on the sentiment curve today (4/2/2020), I would say we are somewhere between Denial stage and Fearful stage. 

VIX remains high and yet many articles stating buy the bottom sentiments. 

The next stage of desperation and panic won’t truly start till we are seeing homelessness increase dramatically, the sick is left untreated to die and there will be violence along with bloodshed from all the panic and anger.

Finally, we will reach the bottom when our news can truly state this is “The Depression” of a lifetime or some ghastly title like that to truly scare the public into total hopelessness.  I know I sound very pessimistic with our outlook, and it doesn’t particularly cheer me to guestimate all this.  However, psychologically, we should all prepare for what’s coming.

We have to prepare to be greedy, when everyone is fearful.  We have to stay optimistic when a time of total depression hits where everyone has lost hope, because that will be the lifetime opportunity that will make or break our future for a better world, for a stronger health care system, and for a more disciplined economic practice.

This blog serves as a reminder to you as much as it is to me to not follow the sentiment curve of the masses but trade to create opportunities for a lifetime.

Pearl Li. The Theta Finder. In the Making.

Tackle Trading: Pearl Li.

Pearl Li previously has been a product management professional for more than 10 years working at well-known companies such as Amazon and Nielsen Company. She took the leap in 2016 with Elite Legacy Education to learn about building long term wealth through financial market trading/investing. In 2018, Pearl happily left her job to pursue investing/trading fulltime producing theta style trading that generates monthly cashflow. She is thrilled to be a voice on the Tackle Trading platform to share her transformation as she goes through various phases of her growing experience.

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