Trading When Markets Sell Off

You make more money when prices move from horrible to mediocre than from mediocre to amazing.

This is a thought that my Twitter buddy and founder of Morgan Creek, Mark Yusco, recently stated. Mark is one of the best minds, in my opinion, on the currency and global macro world, as well a major bull in Bitcoin. I drop everything to read reports or listen to any podcast he is included in.

Hindsight is always 20/20, isn’t it? Buy the F Dip or BTFD!!!* for shorthand, is the easiest thing to think while looking at a chart after the fact. Not at all easy in the moment. --

In March of 2009, when the global financial crisis was at its absolute worst, not many people were coherent enough to get long the market. At that time, those who thought they were BTFD had already wasted their ammo on buying the previous “capitulation” bottoms or had lost all their money in the selloff.

It wasn’t an easy trade to pull off. Warren Buffett did just fine, so if you are reading this, Mr. Buffet, please disregard.

Buying the SPY (S&P 500 ETF) in 2009 vs buying in 2014 would have gotten you all sorts of goodies. Dividends, lot’s of breathing room, and most certainly bragging rights.

In cryptocurrency markets, we get a 2008/2009 type correction every 6-8 weeks.

In 2008/2009 Global Markets had a complete meltdown, a financial apocalypse. The S&P 500 went from a high of 1586 to a low of 665 in the course of 18 months, about a 60% selloff.

Bitcoin in 2017 alone had put in six (yep 6) 50% or greater corrections.

Why do people panic, overreact, and miss the BTFD when in hindsight it is so obvious?

We thirst for reason. The first thing people do is look for the WHY.

Why is the market selling off?
Why is the market rallying today?

To Twitter we go. Looking for the answers. We need news to tell us why. We need to be told by someone with 150k followers the reason that something is selling off, because someone with 12k followers is a n00b and doesn’t know anything, or some other gibberish logic.

Then, once we’ve satisfied what it seems to be, we start reading the articles.

Bitcoin To Be Regulated.

China Bans Cryptocurrencies

When The Dollar Fails The Fed Will Come For Your Bitcoins

Over and over we get fed more bad news, paying the authors with our clicks, our likes, our shares, our views. Bad news sells better than good news.

If it bleeds it leads.

By no means would I suggest that BTFD is a trading strategy to bet the house on. But when the market is falling apart and everyone is saying it is the end of the world, take a step back. Don’t go to Twitter to figure out “why” the market is selling off.

Go for a walk, listen to an audio book, take the day away from your screens.

If it is truly the end of the world, you can come back and die like everyone else later. Even better, if indeed the world as we know it is ending, you can short sell the market just as easily as you can buy the market.

Real bear markets last a lot longer than most people think, and waiting for the market to confirm that you are indeed in a bear market is a lot more profitable/safer, as a short seller, than trying to get short at the new all time highs.