What a week! Kicked my Ass. Remember, do not use leverage to buy risky assets. Risky assets can provide above market returns but only if you can weather the storms. Weathering the storms means not getting margin called and being forced to liquidate your holdings. It is a shitty feeling.
So, what may I impart to you about this experience? First, I have two portfolios where I do use leverage. Weeks like this, occurring after I felt confident of a rally higher, saw me become fully levered with these portfolios. My bottom has been spanked on these two as I did get a margin call on one. So, what did I do in this environment?
First and foremost, I do not commit more cash to the underwater portfolio. I made a mistake in seeing a market primed for a rise when in fact it was getting ready to fall off a small cliff. Batting average is everything, so remember you will and I will be wrong at times. The question is what do you do when you are wrong? I sold down positions to meet the liquidity need as I treat each portfolio as a stand-alone that must survive on its existing assets with no throwing good money after bad. I sold some Bitcoin, but nothing else. Why? The multiple expansion of non-BTC assets at today’s prices feel to me that the outsized potential returns are within the Alt-coin market vs BTC. A very risky approach, but that is what this portfolio is about, high risk, high reward, high losses. Overall, I am not highly leveraged, but I do maintain distinct high risk strategy asset groupings to meet my goal of above market returns. Sometimes it works and sometimes it does not.
Remember, great declines and great surges higher are mostly transitory, and that is why you target buying low and selling high because the market is not static and will ultimately revert to the mean.
Keep the faith…
TJC
This chart let’s me see how far the current market cap is from the last low over the prior 90 days. As you can see, we have been at the zero level recently as we set new lows over the past 90 days. This condition, as you can see looking back in time, occurs infrequently and may be used as an indicator of market sentiment change when there is a breakout higher that exceeds the prior bounces.
This chart takes market data and assesse whether strength or weakness is more prevalent in the change of the current market over a 30 consecutuve day period when compared to the strength or weakness over the longer period of 90 days. I am looking for a change in momentum that may validate a new bull or bear run. This chart tells me we are on the cusp of a bull run higher.
This chart takes market data and assesse whether strength or weakness is more prevalent in the change of the current market over a 30 consecutuve day period when compared to the strength or weakness over the longer period of 90 days. The magnitude of the peaks and the valleys has been in a volatile period of dramatic price swings. From the current level I am paying attention to see if we move to a less volatile and more sustainable direction that is rational in a more normalized environment of demand and adoption.
Changes in momentum may be seen by simply counting the number of up days and down days over a rolling 90 day period. The current position tells me the market is neutral and churning. It has come off of a negative period where down days outnumbered up days. That has moved to neutral. Is the momentum there to keep building on a positive count? Stay tuned.
