We've arrived to my first market theory article. I will be uploading these as a means to teach new traders concepts of what the market does and even experienced traders something new they maybe don't know.

The economical topic of today will be, as I had announced some days prior, game theory on technical analysis. What prompts a pattern to be like what it actually is? Is a question I'm sure anyone has made. You see all of these candle games and "bullflags" or "bearish divergences", but why do they actually play out like they do?

First of all, chart analysis is not a be-all end-all. Anything smaller on a timeframe than the 4 hour charts will probably be wrong 80% of the time. On a small timeframe, markets tend to move in a random-walk pattern. Specially with crypto, since there is so much leverage in the system, the price can just do whatever it wants to.

Usually we need to focus on larger timeframes to arrive to a conclusion.

This occurs because rational players (from a game theory description) wait for confirmation to move. Suppose markets are a sequential game. It is in your best interest to be patient and draw as much information as possible before you make a move. Unlike traditional game theory tree-diagrams, the payoff of our actions is often and mostly a probability game between guessing if our position will go as wanted or not. However, this pattern building usually just gets ignored in bull-runs.

Bull runs are a term used to describe quickly and rapid upwards momentum of price. This is what I wanted to mention, and why "Fear of missing out" (FOMO) is a big factor for markets. If upswings or downswings in price occur quickly, people rally to continue the trend. Say, if we were in August earlier this year, and you saw your investment quickly go down, you'd also think to be on board of stopping your loses, correct? This is a rational phenomena, but the cause is irrational. Euphoria is the cause and it goes both ways, both in bull and bear cases. If we saw the price explode beyond 70,000 these upcoming weeks, I'm sure it will rally higher in a matter of days. People with money on the sidelines feel left out on potential gains, and bears hit stop-losses on their short positions.

If you want to beat the market, time in the market really is far way superior a strategy to timing the market. Without any risk of liquidation, or with it being really low, all you have to do is confidently hold your position. Here's an interesting graph of economical progress and downturns;

If you had bought in the South Sea bubble in 1720, you would have to wait until 1813 to break even. Sure 100 years sounds catastrophic and most people in the market are in for the quick gains, but that's why you as a player, must be different. Patience is an asset valued above gold prices. It is just that much important.

For another "maybe I can time the market" context, if you had shorted the top of the 1929 bubble just as we entered the great depression, getting too greedy can be harmful. Cashing out at the bottom or as you saw it recover would be great, because such downside would never happen again! So yes, be patient, but also take profits at different levels.

Remember. If you haven't closed the position, no loss or gain has been realized. Use that to your advantage. If you must close a position think twice. Realizing a loss or just waiting for it to recover are not the same; if you realize a loss you'll need even greater % return to make it back, while holding it out will eventually cancel such loss out.

This all sounds great on paper, but reality can be much different and tougher. That is why you should NOT invest money that you depend on for living, because it will make you take decisions like closing positions to stop a bleed on your money. This is what big players prey on.

With euphoria and holding being described, this also begs a question; when will retail and general masses return to cryptocurrency? How much higher does the price need to go before we kickoff the euphoria phase? I believe, not much longer. Historically these last end of year months on halving years have proved great for % returns. I've had a couple of friends telling me they'd invest at 70,000 because "that means the price is definetly breaking out". Remember to avoid thinking as the masses, otherwise you'll just be exit liquidity! Play the game and beat out these first-movers which like to trap you into positions and make rapid swings in price, and beat third-movers, which will jump in AFTER you've made your position. Be the middle man, and be patient!

Nothing in this article is strict financial advice -- it is just a description of my thoughts. Though I guess you could tell anyone to be patient, because in life, and outside of markets, patience truly is the greatest virtue.

I also like to just talk about Bitcoin, #BTC and or #ETH because these coins are the biggest caps in the market. Much like how the S&P 500 goes up thanks to the Mag-7 companies in great proportion, the crypto market of alts and memes moves alongside the Bitcoin trail. How curious is it that other assets -- that are not living humans -- follow the path of the first mover (Bitcoin)? Goes to show how this game theory, truly is empirical.