The past 5 days we saw a gradual decline in market sentiment from 0.67 on June 30th to 0.55 on July 6th. In itself, the range between 0.67 and 0.55 is unspectacular because these values are close to a neutral range. Our review of more than 1.2 million news items over the past 6 years, identifies the average market sentiment value at 0.62 (financial journalists writing to a “long” oriented audience). Read more

Tags behavioral finance indicator - bull bear psychology - cognitive dissonance - crowd psychology - dax futures - derivatives trading - excessive investor optimism - investment strategy - market psychology - market sentiment - market trends - psychology trends - sentiment volatility - trading strategy

Behavioral finance focuses on the psychological aspects of investing. Specifically, it studies how our emotions affect financial decision making. As investors we take decisions based on data analysis and judgement of risk. However, the natural qualities of the brain also influence us. Subconsciously we apply rational and emotional reasons to justify our actions. Such reasoning is often based on subjective perceptions, not on objective observations, leading intelligent and well informed individuals to the wrong decisions. Read more

Tags behavioral finance - cognitive dissonance - confirmation bias - investment strategy - market psychology