Recently, we’ve looked into a new trading concept called “Mind The Gap”. The strategy looks at how the sentiment develops towards the end of a the day. We then use this data to anticipate the opening gap for the following day. Although it is well know that (very) bad news publish after market close, our data show days ending on a positive note to be followed by a positive opening. Read more

Tags behavioral finance - bull bear psychology - crowd psychology - end of day sentiment - excessive investor pessimism - gap trading - market psychology - market reversal - market sentiment - sentiment volatility

Last week, SentiTrade’s behavioral finance indicator was integrated at Finanztreff.de, one of the most most important German financial news portals. Finanztreff is owned by the vwd group, a leading European provider of customized information, communications and technology solutions for the securities market. It offers innovative solutions for financial service providers, corporates, media and private clients.
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Tags behavioral finance - behavioral finance indicator - crowd psychology - dax futures - dax index - dax options - derivatives trading - excessive investor optimism - excessive investor pessimism - market prediction - market psychology - market sentiment - sentiment analysis

The basic concept of market psychology is explaining the following behavior: “Everyone else is doing it, so… perhaps I should be doing it too!” Sounds familiar? No one wants to be left behind as everyone else is raking in the cash and while everyone is trying to get in the door at the same time, prices escalate to new highs. Read more

Tags behavioral finance - cognitive dissonance - confirmation bias - corrective waves - crowd psychology - dominant trends - excessive investor optimism - investor psychology - market psychology - sentiment analysis

Behavioral finance starts with the acknowledgment that investors are less rational than we would like to admit. Specifically, this theory states that conventional investment concepts ignore how people really behave… Let’s have a look at the main principles of behavioral finance: Overreaction: The stock market overreaction hypothesis (ORH) holds that if stock prices systematically rise and fall as a consequence of excessive investor optimism or pessimism, one can predict price reversals based on past performance. Read more

Tags behavioral finance - excessive investor optimism - excessive investor pessimism - Fear of Regret - Investment choices - market reversal - OHR - overreaction hypothesis