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Ep. 33 - Fear Pays the Bills
Manage episode 470023426 series 2854510
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Wall Street is a waiting game.
Traders make hay when volatility strikes.
Ultimately, fear pays the bills.
Professional traders’ P&L follows the Pareto principle, also known as the 80/20 rule.
80% of the profits come from 20% of the setups. This is accurate as I vividly remember how lucrative forced selling events were.
The capitulation liquidity cycle follows a repeatable pattern:
- First, news headlines or worries seemingly spring out of nowhere
- Small scale selling ignites a surge in volatility
- Everyone rushes for the exits at once
- Fast market conditions ensue, market makers widen their spreads, and big Wall Street paydays are made
We’re in the midst one of these events right now. Our data reveals some of the largest outflows in years. While it’s painful to sit through, watching portfolios drop…ultimately these capitulatory events pave the way for the next leg higher.
Disclosure: This recap uses AI to better explore our post here: https://mapsignals.com/map-blog/fear-pays-the-bills/
Remember none of this is personal advice of any kind. This is for entertainment and informational purposes only.
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