Investing based on the past? - Not always a good guide
Hello to everyone, I hope you are having a good start to the week and better still a very productive week, I ask you the following: read the following sentence
"In the business world, the rearview mirror is always clearer than the windshield ". Warren Buffett
Don't you think that the previous sentence is not conclusive?
The reality is that this phrase left me thinking, deepening about some things, and without a doubt, it led me to remember my beginnings in this world of cryptocurrencies. I have commented it in other opportunities, my beginnings in the Crypto world were with the Trading, then it was that I arrived at a chain of blocks that allowed me to gain something publishing.
I remember clearly that one of the things that was very clear to me is that the analysis of cryptocurrencies and their prices is based on having a deduction of where the price is going to be directed, but this supposed direction of the price is based on previous movements (past), that make us think that in one way or another, the next movement will be similar to what already happened...
I explain? I hope so.
But, things change permanently, and the conditions that existed one or two or more years ago, from the macroeconomic point of view are not the same, so deducing a market movement based only on patterns, which is more of a technical analysis, can lead to certain errors, since a ban can occur in one country, for example affecting the price of cryptocurrency in particular, or if it affects Bitcoin, it will generally affect the majority.
So, is trading risky? oh yes, it is, the chances of getting 100% of the forecasts right are practically zero, if there is a 60-70% hit rate and generally a good margin. The important thing is that the hits are greater than the misses, and also that there is a good risk control, that is, to have very clear how much we would be willing to lose in each transaction if things do not happen as we think. That's why this type of activity is not for everyone, because you have to have a lot of control over your nerves in order not to get into trouble.
But, looking back, as Warren Buffett says in that famous phrase can serve as a guide, you can't say no, but, you always have to know that times are different, that the acceptance of cryptocurrencies nowadays is greater, and that the states of the planet are looking to have interference in the crypto world, something that didn't happen in the beginning.
So, for any business or type of investment we have to make, we have to look at the past, of course, I agree, but we always have to contextualize our analysis based on the current reality, because every day there are great advances or pronouncements regarding something that can directly (positively or negatively) influence that which we want to invest.
Maybe it is a little daring to question a famous phrase of this world-renowned character as a great investor, but I think I have a valid point of view.
Thank you very much for reading me.
I would like to read you in the comments.
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Hi @josevas217
As they say over there the glass is half full or the glass is half empty.
Your affirmation and the one from whom you were inspired in both can be found something very reasonable and in both it can be said that there is great truth, especially in the cyclical.
Thanks for your comment @lanzjoseg
Yes, the cyclical is a reality in the world of finance, really, the only thing is that it occurs in different contexts.
But these are realities that we must know how to see and analyze.
Good article, in the world of investments especially in the coins what worked in the past is no guarantee of anything in the future.