AlphaBetaStock’s Cheat Sheet is a weekly journal that helps conservative financial advisors & investors save time, cut through the noise, and increase returns. The concept is a “Wall Street Cheat Sheet” to help find a market cycle and profitable sectors. It is written by Irving Wilkinson, who is a Marine, former financial advisor, and self-avowed “Capitalist” with 25+ years of investing experience.
We don’t chase returns, “Meme Stocks,” or promote a political agenda. Our market research goal is to increase the alpha (returns above the market) while considering the beta (volatility) through technical and fundamental analysis and geopolitical events.
If you’re investing in the stock market – good for you! You’re several investments away from making your first million dollars. However, to increase your chances of success, take the time to educate yourself on how to invest in stocks intelligently and confidently. Lucky for you, there’s the internet at your disposal. Familiarize yourself with online resources and make a trading plan. Learn how to trade and protect the money you earn.
While at it, one thing for sure is that you’ll come across the term Wall Street Cheat Sheet. And understanding what it is and how you can use it is key to your investment success. Unfortunately, you won’t find much information about it online.
But in this article, you’ll learn everything you need to know about Wall Street Cheat Sheet, including what it entails and how to use it.
What is the Wall Street Cheat Sheet?
The Wall Street Cheat Sheet is a chart that goes through several cycles based on the primary human emotions of fear and greed. These two main drivers of investor behavior have broad phases and a spectrum of emotional behaviors.
The chart extrapolates a part of a more extensive market cycle and analyzes the emotions and psychology involved with each segment. It starts with the market rising and then going down a little bit, which leaves investors in disbelief. The market rises again, and individuals become hopeful, optimistic, believers, thrilled, and experience euphoria at its peak.
The markets then plummet, and investors become complacent and anxious and enter into denial. As the prices continue to go down, the investors panic, capitulate and become angry or depressed.
The Wall Street Cheat Sheet perfectly illustrates how an individual’s psychology or emotions are tied to the market’s price. That’s why it’s hard to come across a profitable trader. Greed and fear make investors irrational.
Is trading and financial markets that predictable?
Looking at the Wall Street Cheat Sheet, it’s clear that the financial markets are somewhat predictable. If you were to look back for hindsight and the current stock markets, you could tell that the cycles perfectly match the Wall Street Cheat Sheet chart.
Understanding the market cycles
In 2017, the crypto markets went in one of the best bull runs. The price of Bitcoin rose by 20 times between January and December, after which it crashed. People observed a pattern in the markets during this time. Then, they made the Wall Street Cheat Sheet to represent this pattern.
So, what exactly does the Wall Street Cheat Sheet express? What can you – as a trader or an investor – take away from it? let’s see below:
A market is a market
As an investor, the Cheat Sheet tells you that although different markets have differences and quirks, they have some things in common. For instance, in all markets, emotions propel massive, volatile movements in stock markets. Here, greed, fear, and the emotional spectrum between these poles control the stock markets, leaving a traceable pattern.
Whether you’re trading on S&P, Nasdaq, or Bitcoin, fear and greed will dominate the market flow. And this is well confirmed by the Cheat Sheet, which captures the emotional component of trading investment.
Market trends are complex
If you’re a trader, the chances are that you’ve heard trade experts say that “the trend is your friend,” which is entirely accurate. Trading is all about trends. Spotting a trend between different timeframes and using them to trade intelligently is what makes up trading.
However, as a stock market connoisseur, I usually add a subjunctive clause to the expert’s saying: “the trend is your friend – until it’s not.” You see, trends can be multi-dimensional, complicated, and not always easy to parse across timeframes accurately. It’s not always easy to tell what trend is on X timeframe.
Predicting Market Cycles in Financial Markets
The stock market is a volatile system. Most of the time, the price fluctuations in the market are in response to external factors. However, there are certain periods in time where stocks rise or fall solely because of the psychology of investors.
Stock Market Cycle Analysis is a tool that helps investors analyze one cycle in order to better evaluate when to buy and when to sell stocks, bonds, or other securities. The cycles are not uniform. They change according to various periods that are difficult for humans to predict.
Cycles are usually categorized by three different stages: Bull Market, Bear Market, and Neutral – each with its own set of indicators that can be tracked through different tools and analyses.
The AlphaBetaStock’s Report, aka Wall Street Cheatsheet, shows the marketplace pattern of a hypothetical asset bubble that bursts after a so-called downward spiral. This is a generic pattern not taken out of any real chart; therefore, any asset bubble can fit in the pattern.
Bitcoin’s entire industry alone has seen more than three major trading cycles grafted onto this standard template shown below. Losing traders/investors in these cases show emotion as they’re always a step or the opposite from the trading trends. Usually, emotions will burn out too soon. Basically, they’re acting up the right emotions at the incorrect time.
What is a Market Cycle?
Market cycles happen at the very high macro level of economics, down to stock and commodity sectors. In a broad sense, market cycles are trends.
The foundations of all trade and, to some degree, investing are defining trends. Spotting the trend over varied durations is what trading is about. All trends have ended. But before it does, these often fake and reverse trends or go against technical indicators’ predictions.
The economic cycles in the economy are a series of events that create a pattern in which a country’s stock market rises and falls. The cycle consists of four phases:
- Expansion: when the GDP is growing
- Peak: when the GDP plateaus
- Trough or Recession: when there is a decrease or negative growth
- Recovery: when there is an increase or stabilization of the GDP after a recession.
The stock market is divided into sectors. Often these sectors rotate and rise and fall. Much of a stock’s return is based on the sector.
Recently recent examples include the Tesla bull run and the seemingly never-ending S&P200 bull run. The market cycle Cheat Sheet is easily put atop Teslas Chart. Any bubble that appears is bound to include traders losing big amounts of money on a trend change (again Tesla shorters recently).
How do I use the Wall Street Cheatsheet?
The Cheatsheet for Wall Street illustrates the psychology of market cycles. It is very helpful to trade stocks, forex, futures, or even options. It really doesn’t matter what your investment strategy is. The trend follows a cycle according to the market cycles. There is a difference between gambling and
The contents are for informational purposes only. No such information should be interpreted as these sites’ financial, tax, or other advice. Nothing contained in this site constitutes a solicitation, recommendation, endorsement, or offer to buy or sell securities.
Wall Street Cheat Sheet 2021 update
It is 2021, and people wonder whether the Wall Street Cheat Sheet can be used for Bitcoin and other cryptos. And the answer is Yes. Historically, cryptos, especially the Bitcoin charts, have followed the Wall Street Cheat Sheet very well. Today, the chart is equally important to traders and can help them achieve the success they’re looking for. However, individuals should ensure that they trade considerable amounts – not too little nor too big to bring their ego and emotions into the trade.
The bottom line
As a novice investor, looking for resources online is crucial for the success of your investment. And online resources increase the chances of coming across the Wall Street Cheat Sheet, which some people have used to determine the pattern of markets in the past. According to the Cheat Sheet, the flow of markets is determined by two emotions – fear and greed. Learning how to manage emotions in stock is key to successful trading-investing.
Managing emotions in the stock market can be achieved by trading a quantifiable trading system with an edge and using signals other than opinions. Also, especially for a novice, you should lower the trading size to an amount that’s sufficient to be meaningful but not too much to bring your ego and emotions into a trade.