Ch 12 | The Nature Of The Beast

Here is the glossary for Chapter 12. We are officially hunting bears now, so let’s cut to the chase and learn the new terms.

Bear Market: A drop of 20% or more from a recent market high. Unlike bulls, these beasts vary wildly in speed, depth, and how fast they attack.

Bear Trap: A sudden, nasty drop right in the middle of a bull market.

Bull Market: Starts with a 20% rise from a recent low and ends when stocks drop 20%. These are typically long, slow, and fairly predictable affairs.

Bull Trap: A fake-out rally during a bear market. It is just a temporary freak wave that tricks you into thinking the downward trend is reversing.

Correction: A market drop between 10% and 20%.

Dip: A minor market drop between 5% and 10%. Anything less than 5% is just normal market movement.

Economic Clock: A handy visual showing the basic market cycle: boom, slowdown, recession, recovery, and back to boom. It tells us exactly where we are today, but gives absolutely no clue where we will be tomorrow.

ITMB (In The Money Bear): Our mechanical approach to trading a falling market. It is a simple reversion of the standard I-T-M bull strategy, but armed with normalized parameters and a few extra rules to handle the chaos.

OUT Signal: A warning that bull market conditions are simply no longer present. It definitely does not mean a bear market has officially started. It triggers before every dip or correction, and occasional false alarms are just part of the game.

Primary Market: A market cycle lasting more than one year.

Secular Market: A massive, long-term market cycle lasting anywhere from 5 to 25 years. We have spent over 90% of the last three decades in a secular bull market.

Secondary Market: A shorter market cycle lasting just a few weeks to a few months.