Where did the name "Pendulum" come from?
We believe human nature has a big impact on successful investing.
Just like a pendulum swings from one side to the other and then back again, over and over, from one extreme to the other - we believe the human in us drives the performance of stocks from one extreme to the other.
Except stock prices are not as consistent as a pendulum normally swings. It is like the pendulum is in a toddler's bedroom. Sometimes the toddler swings the pendulum fast, other times in a big arc, sometimes they make it swing barely at all, and other times they are bored and just leave it alone to swing as a pendulum would normally swing.
And there is just not one pendulum, there are thousands all swinging at once, each to their own erratic rhythm.
This makes it very difficult to know in advance exactly where that extreme is going to be e.g. what is the lowest price I can buy this stock for or the highest I can sell it for?
This makes it very hard for us to stick to our convictions when the movement is more extreme than we expected e.g. sell when a stock crashes to protect our remaining value or buy back into a bull market that keeps running longer than we expected.
In short, the market swings between fear and greed - the two extremes of loss prevention and pursuit of reward.
How do I buy the best stocks at the best price?
The best you can hope for is to buy in the zone. You never know when that pendulum will reach its extreme. Did that toddler swing it fast or slow? In a big arc? Or did the toddler suddenly cut the swing short? Or has the toddler got bored and left the pendulum to swing in consistent monotony - till it is play time again?
We accept we will never always buy at the cheapest price - but we will discuss some of the factors that may indicate the stock price is in the buying zone.
If it is to be, it is up to you
Please join in the discussion. Add the concepts that make sense to you to your toolkit. But in the end - you need to do your own research to be confident in your decisions during good time and bad.