All the CT is talking about it. Could someone explain it to me also ?
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Think of risk on/off as having 5 different gears. Around the beginning of the cycle you want to start in 1st gear and add to it until you're fully allocated in gear 5.
As things get more stupid, financial opportunity goes down and risk of financial ruin goes up, so you want to start taking your foot off the gas.
This does not mean selling everything and calling it quits immediately as soon as you see froth, it just means switching gears and adjusting your risk appetite down over time.
Essentially this is the same as an exploitative strategy in poker, where you want to be playing more tight against an opponent who is drunk and aggressively spewing chips. It doesn't mean you want to leave the table.
If you keep rotating throughout the entire cycle in 5th gear, you actually just stay max risk on, and inevitably bang your head against the wall because it will *always* feel like there is one more good trade to nail, while all risk correlates to 1 when the music stops playing.
Mindset is another crucial factor, if you strategize your gameplan this way in terms of gears/innings, you always have a very good sense of where you are (in time) and what you want to be doing. Call it "cyclical awareness". Whereas, if you always chase the next thing, it's easier to get lost along the way and fall into the trap of missing the big picture, as you'll be too zoomed in on a micro trade during a macro ending.