The Cycle Never Changes: Notes From Someone Who Traded Two Manias

I have now watched the same movie enough times to recite it. 2008 in stocks from the wrong side. 2017 in crypto from the inside. 2021 from the inside again, older and slightly harder to fool. Different assets, different decades, same script, because the thing being traded is never really the asset. It is human nature, and human nature does not ship updates.

Here is the script.

Phase one is disbelief. The asset rises and everyone who got burned last cycle calls it a dead cat. Volume is thin, coverage is mocking, and the only buyers are the stubborn and the early. This is, always and everywhere, where the real money is made, and almost nobody buys here because buying here feels stupid.

Phase two is momentum. The chart goes up long enough that the mockery goes quiet. Smart-sounding frameworks appear to explain why this time is structural. Your competent friends start asking questions. Buying here feels reasonable, which is why it is the last broadly good place to do it.

Phase three is euphoria. Your barber has positions. Screenshots of gains replace analysis. Leverage becomes a personality trait. New buyers are not buying the asset anymore, they are buying the feeling of being early, precisely when they are late. Every mania I have traded had a moment where risk management felt like a tax on happiness. That feeling is the top signaling itself.

Phase four is the bill. It always arrives, it is always bigger than expected, and it always collects from the people who arrived in phase three using money from phase-one prices. Then the mockery returns, the tourists leave, and the cycle inhales again.

None of this is original. Traders have described these phases for a hundred years. What I can add is what it feels like from inside: in phase three you will have numbers proving you are a genius, an audience agreeing with you, and a dozen reasons why the old rules do not apply. I had all three at the top of two manias. The cycle did not care.

The only questions that matter are where in the script you are, and whether your position size lets you be wrong about the answer. If you cannot answer the first honestly, the second is doing all the work.

The cycle never changes. The only variable is which phase you meet it in, and whether it is your first time through. Second-timers do not trade better because they are smarter. They trade better because they finally believe the script is real. This is not financial advice. It is a synopsis of a movie I have seen too many times.