How to Know the Time to Sell and to Buy. LadoOkhotnikov Believes We Have 8 Years Left

Cyclicity is the law of nature

Have you ever wondered why everything repeats itself? Solar activity changes about once every eleven years. Animals make regular migrations, moving between different areas. Plants bloom first and then bear fruit.

Nothing in life lasts forever, reminds LadoOkhotnikov: trees wither, but new ones grow in their place; the old gives way to the young. The same thing happens in the financial markets. Periods of growth are necessarily replaced by a fall, and low prices in any case rise.

William Delbert Gann is an American trader and technical analyst who became known for his contributions to the analysis of financial markets using geometric and time analyses. He developed a set of tools and methods that today is called Gann analysis or the Gann technique.

Gann believed that markets move according to certain cycles. He developed the Gann Wheel concept, which was a circular chart with time divisions. According to the trader, certain intervals become important turnover points.

The Wheel of 24.

William focused on harmonious cycles and numbers in market analysis. He believed that certain ratios of numbers and time intervals could predict future price movements.

Vladimir Okhotnikov believes that Gann-technique has a rational approach, as it has been proven in practice more than once: “Gunn believed that points built relative to the time and price framework may indicate the upcoming trends. For example, a 45 degree angle predicted a steady upward or downward direction…”

How stars influence the markets

Interestingly, during periods of strong magnetic storms, an increase in the frequency of suicides, accidents and crimes is observed. This emphasizes the influence of magnetic fields on the mental state of a person.

It is surprising that this knowledge has not yet become a universally recognized standard. Among the outstanding scientists who dealt with this topic, it is worth mentioning the Soviet researcher Alexander Chizhevsky. He analyzed a large amount of historical events and found that more than half of the significant dates fell just at the peak of solar activity.

The ratio of historical events relative to 11 years of solar activity. Statistical data for 500 years.

During minimum solar activity, about 5 percent of significant events occur. As it builds up and reaches a peak, this number increases to 60 percent. Then again the recession and so repeats every eleven years.

Another interesting aspect is the relationship between solar activity cycles and economic events. The graph below shows how, at each peak, economic problems begin, accompanied by an increase in unemployment.

Economic downturn in advanced economies relative to solar activity cycles.

Dr. W. S. Jevons has made significant contributions to economics, logic, statistics, and probability theory. But the most outstanding work was the study of the relationship of solar activity to important historical events, which, according to his theory, coincided with peaks and troughs.

In the figure above, we clearly see the beginning and end of World War I, hyperinflation in Germany, the crisis of 1929, the beginning and end of World War II, the beginning of the Korean War.

Given that the Sun has an impact on the psychological state, it is easy to explain why the cycles are so closely related to man.

Market is irrational

Every month markets freeze in anticipation of reporting. Among the microdata of great interest is the number of initial applications for receiving the dole.

Below is an example of the correlation of solar cycles with the employment rate in the United States.

All six cycles coincided with rising unemployment rates. Don’t you find it strange?

Every time solar activity has peaked, the US economy has contracted. This is especially evident in the last wave, when the global financial crisis occurred in 2008, which became one of the most serious and destructive.

It all started with problems in the US real estate market, namely with the growth of defaults on mortgage loans with a low credit rating. These loans were packaged into mortgage bonds (when you take out a mortgage to buy an apartment, the bank provides the money and your house serves as collateral) that were then sold to investors around the world.

The problem was that financial instruments associated with subprime loans (must return more than borrowed) were rated as safe, despite the high risk of default. When non-payments began to appear en masse, it caused a panic among investors.

Fear quickly gripped all the financial markets in the world. Financial institutions experienced severe liquidity problems as they lost access to loans and experienced asset valuation problems.

LadoOkhotnikov believes that the global financial crisis of 2008 was the result of a complex interplay of various factors, and its complete prevention was an extremely difficult task, “Some measures could help mitigate the consequences or even prevent it to some extent. To do this, it was only necessary to introduce stricter regulation of financial instruments, increase the creditworthiness of borrowers, and improve risk management in banks and financial institutions.” 

Why is there so little rational and so much emotional behavior in the markets?

Conventional economic theory assumes that people behave in a predictable way, but it does not take into account the fact that the human brain for the most part functions emotionally and irrationally.

The fundamental dominance of the emotional reaction over the rational one is also manifested in the market. The constant reassessment of profit and loss creates a huge pressure on traders who are subject to a state of fear and greed. As a result, logic is suppressed, and emotions go wild.

In addition, our brain contains many cognitive distortions that affect our perception. These are some kind of errors in the work of the mind, forcing us to think and make decisions that are not always justified.

These “glitches” in thinking affect how we see the world and how we interact with it. Instead of thinking objectively, a person sometimes makes mistakes in logic and assessment of situations.

For example, if we are looking for something, then we remember only those facts that confirm the prevailing opinion, and ignore the rest. Or when we become more attached to something just because we already own it. Let’s say we have a project token, we will think that the coin is worth more than it actually is, because it is our asset.

What will happen next?

Coming back to Jevons’s study, which described historical cycles, 2020 should be the last year when concerns are at a minimum. This period is characterized by inconsistency of mass behavior, peace-loving moods, tolerance and compliance.

However, with an increase in solar activity this mood will begin to change towards more anxious and aggressive emotions. And in the end it will lead to a rethinking of the value of money and assets.

Very soon we will see this shift in sentiment and how it will affect the financial markets. But one thing can be said that we have already passed a third of the path of the 11-year solar cycle. And ahead of us is another peak which will make it clear how strong the global financial system is.