From the Desk Of A Trader #19
"The market itself is the best lecturer and the bigger your exposure, the more you need to anticipate the unthinkable."
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Support and resistance levels and our daily, weekly and monthly bias on BTC, ETH, CL, ES, and NQ as well as our favorite altcoins.
Today, we are happy to share the thoughts from the desk of a commodities trader. The following views are that of Martijn Bron and do not represent the views of his employer.
From the Desk Of A Trader
I watched a very interesting and accessible documentary about boom-bust markets.
It was recommended to me by one of my former Cargill cocoa trade team mates, who now runs soft commodity derivatives at a different firm, and shares with me a passion for financial #markets.
It is a Dutch made documentary but spoken in English.
It was made in 2014, coinciding with the bottom of the economic cycle, following the 2008 GFC which it reflects upon.
It is very relevant as it is about how we as human beings can't help ourselves in financial markets and continue to repeat behavior which leads to boom-bust markets, which are destructive to the broader #economy.
- We just experienced the burst of the 2021 bubble in stocks, crypto, NFTs and SPACs
- Only shortly after that bust we now have entered a period where #artificialintelligence dominates the financial media headlines, which can be a breeding ground for similar hypes, booms, and busts.
Reading books, and watching films and documentaries about financial market history is important, as you can learn from it, to recognize behavior and patterns which have happened in the past, to prevent making similar mistakes.
Real life experience is always best though, but people seem to forget quickly when new economic paradigms, miracle assets and strategies emerge and neighbors are getting rich, because this time is different.
It never is.
To an extent forgetting the past by moving on and assuming that after a bust a boom will follow is ok, as had you stopped #investing after the 2000 Dotcom crash (the first one I experienced), you would have missed a lot of market upside. But learning from the past helps you to recognize market extremes, and prevent getting wiped out for good.
In the documentary a host of Nobel prize winning economists share their views, like Robbert Shiller, Paul Krugman and Daniel Kahneman and other well known economists.
Listening to those economists I thought they miss one competency, which may be the reason why some models are flawed; #trading experience.
Outliers and black swans happen.
The market itself is the best lecturer and the bigger your exposure, the more you need to anticipate the unthinkable.
I also learned about Hyman Minsky and his hypothesis that stability leads to instability due to too much confidence, deregulation, leverage and complacency, causing boom-bust cycles.
One element always present during and often causing market and economic boom-busts is debt.
Former Dutch minister of finance said during the GFC; "if too much debt is the problem, more debt is not the solution".
One element always present during hypes and booms is the idea that wealth creation can happen effortless, for the masses. This is impossible.
Watching the documentary strengthened my opinion that the FED and ECB should not cut interest rates at the first material financial markets or economic setback.
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