More often than not, we need to judge what cycle we are in and where we are in the cycle.
Cycles, as a common phenomenon in nature and social economy, are essentially things that go back and forth in a certain pattern. One thing happens in a certain order, one after another, and repeats in order. It is like the change of seasons, which repeats in time. In the economy, prosperity, depression, recession, and recovery occur over and over again. This cyclical fluctuation is not only affected by natural laws, but also deeply rooted in the complexity of human behavior.
When things deviate seriously from the average, they will move back to the average. As the old saying goes, everything will decline after reaching its peak, and everything will turn around after reaching its peak. A reasonable center point will pull things back from the extreme to the normal state, return to the center point, and keep swinging back and forth.
The most profound impression is the bubble period, when huge wealth evaporated overnight and the bubble burst. Back to the 2008 subprime mortgage crisis, every time the stock market fluctuated, some people accumulated a lot of wealth, while others went bankrupt overnight.
It is human emotions and behaviors that cause the market to go to extremes. The fluctuations in the cycle are often caused by human participation. When the market is in a frenzy and prices rise rapidly, people start looking for reasons to comfort themselves. Driven by greed, people believe that prices will always rise, just like land, which is limited, and start to buy. Driven by emotions, the bubble economy of the market grows bigger and bigger until the subprime mortgage crisis breaks out.
Human beings’ excessive optimism creates bubbles, and asset prices move away from reasonable values, like a grand carnival. They then return to the mean and continue to burst. Because of excessive pessimism, they go to another extreme, return to the mean, and then return to the center from the extreme point. Human behavior drives the cycle.
Of course, where there is a rise, there must be a fall, and where there is a fall, there must be a rise, but this cycle is not mechanically symmetrical, and there is no way to accurately judge and predict it based on factors such as amplitude and time.
The world is always full of randomness. An event will not happen completely in a set order. It is often accompanied by a certain randomness. Things are interrelated and closely related. From event one to random event two, which triggers changes in events three and four, human behavior also has a certain degree of uncertainty. When faced with temptation, desires change with time and mood. The same thing, due to human desires and behaviors, when it will reach the highest or lowest, and when it will happen next, are all difficult to predict.
The cycle, in simple terms, is the order in which an event occurs, and it repeats. The energy changes of the cycle come from the natural laws of human behavior. It changes around the center constantly, and from the highest to the lowest, random events occur.
When you have a certain understanding of the cycle changes and development trends, establish a certain basic framework awareness, and take action, it will not only improve our wisdom, but also open up a God's perspective. In the adaptation cycle, it will be much easier to do the corresponding things. At the same time, you will remain rational and calm in the face of a complex and changing market, and the risk will be much reduced.