Mental Capitulation

There’s really two types of capitulations that occur when people speak of such in the marketplace. The, the one that you can see that’s terribly skin deep and almost kind of banal, cuz everyone sees it after the fact is the massive deluge of selling – the puke point – the parabolic down kind of movement where the folks who didn’t take losses earlier, when they should have just can’t take the pain of being long stock anymore. And they indiscriminately hit the cell button. That’s close to a bottom typically, but as, as you can imagine, that’s not how I see things because I see this as an emotional reaction, right? So it’s probably the same thing. Just looked at two different ways if you want to get specific. But what ends up happening is the mental capitulation happens first. And then people just throw up, throw in their cards.

They muck their cards, they throw up their hands, you can figure out how it works and cuz they just can’t take the pain anymore. Right? There’s all that. There’s the fear of missing out. There’s the fear of not participating. There’s the fear of expectations not met and they just get frustrated and disgusted. Why will cuz they didn’t really have a plan to begin with. They put their money to work. The money was making them money. But then when market conditions turned sour, they realized they don’t have a plan. They thought it would just be a 10% pullback. They got hit more than 50% on their Disney for example, which is still trading at a 70 multiple and they just get disgusted. They don’t trust the system when they really don’t trust themselves. The other thing that can happen is if you’re smart enough to have taken small losses and you’re sitting in a ton of cash is you can have the same type of reaction on the buy side.

You might look at the market and say, oh my God, it’s come back so much. It’s down 30, 40% tiger. Management’s getting killed. I’m not in tiger. But if they got killed, how I can certainly have that happen to me. And so you kind of capitulate on not participating and you start to plunge or jump back into the market because you feel the pullback is reasonable enough, right? And it probably won’t go down all that much. So that’s a gigantic mistake. What you learned the hard way is to sit on your hands and to get comfortable with that. Knowing that days, weeks, months, maybe a year is gonna go by before the market conditions turn around and become amenable to your style. So you can save a lot of money by not falling victim, to this emotional frustration of not being able to participate. Because everything that you see is going down, you can exacerbate this by trying to look at shorter timeframes, like intra day patterns in an otherwise downward market.

So if you are looking at trying to look at a rally in a down trend, look at the daily and the weekly charts. If those charts are down, I think it’s stupid to try to buy rallies on intra date charts. That’s what I’m gonna say. You probably have coaches and mentors are trying to look slick and be cool and trying to outsmart the market. But to me that’s a fools errand and more times than not, it costs you money. Sometimes it costs a lot of money. Why do I say that? Well, because I get the emails from the people who say I was with this coach and mentor and they were saying to do this and by this intro day breakout and not take stuff home and they basically stay say stuff because no, one’s there to challenge them like me. Right? So I get to call them on their bullshit…

I don’t mention them by names, but I know who they are. And that’s the problem with trying to sell tactics is that if you don’t know who the people are and what their psychological makeup is the client comes thinking like, oh, I’m, this is gonna buy my way to trading salvation. And you learn the hard way. That’s not the case because you are the biggest thing that you need to study. So if you fall into this trap of thinking like the solutions that you need are just one more trading tactic, you’re missing the point, all the trading tactics that you’ll ever need, you can get for free probably on YouTube. I don’t know for sure, but I’m, I bet a lot of money that that’s the case. The question is which one is best for you. And you only get to know that from trying it out, right?

And the way you try it out is you pick one tactic, one setup, one chart pattern, and you get really good at that. And it might take you a while. You’re gonna lose money. That’s the tuition that you pay to figure it out, right? If that bothers you, you’re in the wrong business, you can always go to paper trading, but that’s like watching porn. Would you rather be in the sack? Would somebody, would you rather watch someone else be doing it? So at the end of the day, don’t find yourself in this fear of missing out stuff or thinking like you can’t take the frustration of not participating anymore and wanting to nibble back in because that’s how you lose a lot of money. The market is communicating with you. It’s saying stay away. I’m not interested in going up right now.

And so if you come to the marketplace saying, Hey, I know you’ve pulled back, but I think you hit a bottom right now. And the market’s saying, no, I feel like shit. I don’t want to talk. I don’t want to go out. I don’t wanna have friends over. I’m not taking deposits and you want to go ahead and step in do that with like one 10th of 1% with a call option where you can keep your losses small, but don’t make any big pronouncements. Especially if you don’t have any experience, cuz you don’t know you haven’t lived through it and you can infer what you think or what you feel, right? Feelings, aren’t facts.

And this is a message to try to help you save money. Cuz I’ve been in these situations before where you have all these prognosticators coming, say the market’s near a bottom. Fuck. Do they know? Don’t trust anybody in their opinions? You have to do it yourself. The market’s going down. Don’t fight the trend. Okay. Anyway, I’ll talk to you tomorrow.

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