The Four Stages Of The FI Bear Market



  • Typically, bear markets have four stages and the FI market is no different.

    Stage one is recognition. Almost everybody shrugs off a bear market’s initial slide as being an ordinary event. The markets rise, and they fall. Treating any normal bad day or week as the bear’s arrival would not only shred one’s nerves, but would cause poor performance, should a trader act upon that instinct. Nine times of out ten, realising a quick 5% or 10% loss would not result in a permanent 5% or 10% loss, as shares would quickly return to their previous level.

    The FI bear market started slowly in early February 2020 with the realization that football in China was being postponed in late January 2020 due to the Coronavirus. Stage 2 gained traction on “Brown Sunday” (February 24th) when the masses realized something was up when prices started to fall quickly due to the new platform mechanics that were in place. 300 shares could drop the price by 1P, so it did not take much for a negative snowball to take hold. While many blame FI for removing IS as the cause, the simple fact of the matter is FI would have introduced massive spreads in the event they kept IS under there remit as they would have had to accept full liability for the mass un-listings which in essence would have jeopardized everyone's investment.

    Stage two is panic. This occurs when traders realize that the standard advice issued by many of the FI guru’s is failing. Buying on the dip in this stage is not the easy money, as it is nine times out of ten. Rather, it leads to greater damage. Along with the pain (and regret) of unexpected losses comes the surprise that the conventional wisdom was wrong. Investors’ faith is tested, and some are found wanting. Many sell first, then ask questions later.

    This stage is a difficult period for traders/investors as it is difficult to apply rational analysis when so much happens, so quickly.

    Stage three is stabilization. Prices in player shares halt their decline, thereby ending the impression that they will do nothing but fall. The panic subsides but the situation remains grim. This period is marked by turbulence. Shares rally, sometimes furiously, only to be knocked back down. Investor sentiment varies between guarded optimism that the end is at least remotely insight, and despair that the hope was false. This is typically the bear market’s longest period, extending for several months or years in the case of some business markets.

    Stage four is anticipation. This is when shares start their recovery. As with the bear market’s beginning, almost nobody recognizes its end until after the fact. The news at the time tends to be almost unrelievedly grim. However, some traders will anticipate the value and yields on offer and thus make bids, and shares begin to rise.

    CONCLUSION – I believe we are currently late in stage 2 or bordering in early stage 3. I would be absolutely shocked if this platform failed as the passion shown by everyone, no matter what opinion they hold is truly amazing. For those who are here for the long term, this period will stand you good as you will be well prepared when it happens again in years to come.

    Stay strong, offer good advice to those that need it and I look forward to competing with everyone on the other side of this.



  • Good post.



  • @Karl 👏



  • Nice post. Trying to keep calm myself...
    I just login every day and see yet another day with Portfolio valued wiped.. 12% in the last 7 days..
    I am damned if I am selling at those prices.. It must turn.. Sometime some day.. Hopefully not in a galaxy far far way..
    Low end value IPD flips is all I am doing..



  • Power post! Personally I think we are in stage 3 and hoping that we start to move into stage 4 early half of next year. Current unsettling trends are down to Christmas and traders still wary. Having said that, who knows what impact Covid and vaccinations will have on financial markets generally next year.



  • Good post. At some point the slide will plateau. Ppl are greedy by nature. With such low prices and exceptional divs on offer, it should be a matter of time before pp come sniffing. New year and spring seems most likely.



  • @Karl
    Thank you for a well informed post lets hope people take notice, top man.


Log in to reply