Taking reference from the last post on the channel, I would like to highlight a bit more on that, and why people should learn sentiment analysis to stay cautious in the market always.
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I'll be making the article as short as possible, to highlight the basic points.
So here are a few points to consider:
Remember warren buffet statement: "Be fearful when everyone is greedy, and be greedy when everyone is fearful"
When Bitcoin hit the peak, the whole world was bullish, CT 'gurus' were calling a $100k Btc, a $50k btc, a Million Dollar BTC, and all. No one, (or at least I bet 99% of the people) even in their wildest dreams could imagine BTC falling down till $3k.
Euphoria hit the market, people were market buying at whatever prices they were getting, and just hoping to sell it higher.
So the theory follows:
When the entire market is bullish, when the entire CT is bullish, when all telegram channels are bullish together, when CNBC is bullish, and stuff like that, sell and exit. Wait for sometime. Look out for bull traps. Dont FOMO.
Now that was an example of a Major Top.
Considering another fact that market works in the series of loops (as per some observations)
So what will happen is that, the similar effect happens on smaller timeframes also. Sentiments aren't just limited on Large timeframes like during the peak at 20k.
The important thing here is to learn how to identify these things.
Now you may ask, why this happens, when everyone is bullish, why will the market still go down?
Well, I have an explanation for this:
Lets say Price of Bitcoin is $4000.
Lets say You see majority of the people are expecting Btc to hit $5k.
Price moves up. (Also, take note of the volume and news).
If news sources turn bullish, more people (or rather newbies having less experience) will buy in on top of all the people who were already bullish from before. (Assumption: People who were bullish would have already bought BTC below 4k)
Now, lets think of one thing:
If all the people who were bullish already bought, and if all the newbies also buy after that, the thing is, you must notice, there is lack of new buyers.
So This is the major reason why market acts opposite of majority of the people's bias.
Same thing is applicable for selling also.
If everyone sells, market will eventually run out of sellers.
So when everyone panic sold, just buy, wait for market to turn back. And sell when everyone else is greedy.
This of course is a very tricky game and will probably take months (or maybe even years) to master, but patience is the key.
Hope you find this article relevant and useful.
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Happy Trading.
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