I’m not going to turn this week’s email into yet another “what to do in the face of Covid-19” missive.
I’m sure your inbox is crammed full of that kind of stuff already. Mine certainly is!
What I’m going to suggest instead is that you treat this remarkable period in history as an invaluable part of your trading education.
That’s right. I’d like you to sit back and observe what is going on around you and learn from what you’re seeing
And not only in the financial markets, but micro-markets a little closer to home too… like the toilet roll aisle in your local Tescos!
Because what you are seeing is primal human nature being slowly revealed.
The same ‘fear of missing out’ that drives toilet roll hoarding is the same emotional response that drives financial markets.
Take the stock market as a perfect ‘toilet paper to financial instrument’ comparison…
The S&P500 is the benchmark US stock index. It is the ‘goldmine’ of the US economy.
The S&P500 has been in an unbreakable uptrend for the last decade. It has been largely propped-up by the US Government/Central Bank injecting cash into the system whenever the economy looks a bit wobbly. Because US stocks should only ever go up, right?!
So whenever there’s been a bit of a dip in the market eager buyers have swooped in.
They hoover-up stock because they fear missing out on the ‘sure thing’ increase in price.
But what happens when something blindsides the market like we’ve seen in recent weeks?
The entire wobbly plate comes crashing down as emotions come into play again. But this time it’s a fear of losing money that causes an unruly rush for the door.
S&P down 30.9% within 18 trading days… Bitcoin down 63% across the same time period…
There’s nothing wrong or broken. It’s simply the forces of supply and demand at work in speculative markets – driven by good old human emotion.
These times will be remembered for generations to come…
Books will be written about the traders who made millions in the Great Crash of 2020 (I can guarantee some traders already have!)…
And you get to watch it all play out live!
Note I said ‘watch’ rather than participate. Unless you are experienced, and have a large enough trading bank to accommodate the high levels of volatility, I’d suggest treading extremely carefully at the moment.
Interesting time indeed!
Stay safe and look after your loved ones.