This section is called Trading and contains subcategories Market psychology and Rules. Below you will see the total of all articles in both categories. To filter for either one of them, click the appropriate category in the menu on the left-hand side.
If you have a losing trade that was stopped out, and maybe a string of losing trades, this might upset and frustrate you as a trader. You start to wonder how you ended up on the wrong side of the market each and every time.
As some of the regular visitors probably know, I am a great fan of Dr. Brett N. Steenbarger. I remember reading one of his articles where he discussed the problem of being addicted to trading. To illustrate this, he showed a list of questions that was normally used to determine whether someone was addicted to alcohol.
Before taking a trade, you should have done your analysis. If the analysis shows that the trade has a high probability of being successful, you enter it and see what happens. Now suppose the market moves away and your position is getting worse. No real problem, there is never any guarantee the analysis will work.
When I think about trading rules, the first thing that comes to mind in less than 0,047 seconds is: always use a stop loss. Everyone knows this saying of 'Cut your losses and let your profits run'. That is, of course, easier said than done and this article is not about that. This article is essentially about accepting a loss.
We like to think that humans make decisions in a rational and logical way like computers do. Most economists model the consumer as a rational being, a consumer that makes well informed rational decisions.
Everybody knows this feeling and also knows it is a false feeling. You're in a casino, and the roulette hits red. Then again and again. After three, four maybe five times red in a row, you start to think it's time for the roulette to hit black. Now, in this simple case, you know that's not true.
We have discussed this issue multiple times before. When you are trading, you have to let go of your ego. This also applies to the kind of news a trader reads or the kind of chat rooms and forums the trader is taking part in. There are websites that always bring bullish news and opinions. There are others which are always bearish. Most often this is not high-quality journalism, but more like someone with a loud voice claiming all sorts of things.
Often times, traders feel that the market is full of opponents called 'they'. Traders have the feeling that 'they' (these opponents) are out there to get them. 'They' are pushing the market higher after which 'they' will let it drop. 'They' will hit your stop loss and then 'they' will steal your money. Usually 'they' are the banks, the big funds that can really move the markets. In other words: The Evil. And what 'they' are trying to do is always so obvious, it's almost a crime.
.... that you are thinking that he is thinking? This is the funny paradox that is a big factor in the financial markets. In 'A mathematician plays the stock market' by John Allen Paulos (it's in my bookstore), the author analyzes where this is going and what it means.
Frustration among traders is very common when they go short on anticipation of bad economic data (or long on good economic data). This is due to the fact that in many cases the market does not always come down on bad economic data, or vice versa does not always rise on good economic data. Bad is good sometimes, and good is bad. Traders are frustrated because the market is not doing what they think it is 'supposed to do'.
This section will explain how autotrading works and what the benefits are for investors in the Greed and Fear portfolio. Autotrading also offers the possibility to have the trading results verified by a trusted third party, the autotrading platform. Potential investors can easily see each and every transaction and how those results build up to the current state of the portfolio.
This section is about how trading signals work for the Greed and Fear model portfolio. It's a very good alternative to autotrading, and sometimes even preferable.
As a trader you need rules. One could also say that a trader needs a plan. The trading rules/plan will protect a trader from making decisions that he would otherwise not have made. Sometimes the stressful moments of the markets may disrupt the thought process. It is at those times that rules will tell a trader what to do.
The articles in this section are mostly about market psychology. As a trader, you have to be aware of market psychology, what it does to you, but also what it does to other market participants. Every trader at some point realizes that everything is not what it always seemed to be. There is a somewhat hidden reality behind the obvious one. Getting to know this hidden reality, this different view on the markets and human behavior, will likely make you a better a trader in the end.
The field of machine learning is a very fascinating one. And because the Greed and Fear indicator is a neural network, there's a lot to discuss about ways to apply neural networks and machine learning in trading.
This section has blog posts with a more educational character. For instance, how to place advanced orders, or how to use statistics to your advantage.