⚠️ But buying assets at the absolute peak of a vertical acceleration is sheer madness, despite the recent dip, this is still vertical growth.
👇 Below are the key rules for dealing with parabolic market movements:
🚫 Vertical growth is a strict taboo
Looking at AMD, Micron, or Nvidia, it's clear that even for companies with flawless fundamentals, the peak of a parabola is an extreme overbought zone. The asset simply becomes unjustifiably expensive there.
⏳ Wait for a deep correction
Choose patience over emotions and buying at the highs. A real entry point appears during a pullback of 50-60% (or at least 30-40%) from the local peak. Only during such dips does it make sense to carefully build a long-term position in tranches. Even then, look at the overall market context, the current phase, and the prevailing narrative. The broader market might be at its peak, making it too early to enter even after a 30-40% drop.
💰 Take profit, don't average up
If you've been in the asset from the start and held it all the way through the explosive growth phase, it’s high time to lock in profits into cash. The market almost never delivers a strong vertical move without a deep pullback following it.
Inexperienced investors always act irrationally. At the bottom, during periods of fear and uncertainty, they are terrified to buy (even though it's the ideal moment). Yet, once an asset pulls off a multi-bagger move, the crowd panics into buying right at the top, instantly catching a deep correction.
💡 Key takeaway: Buying a parabola means knowingly taking on massive risk at the worst possible prices. Smart money does the exact opposite: they buy during fear and deep pullbacks, and during vertical surges, they lock in profits and calmly wait for the next opportunity.