There are times when market psychology is particularly sensitive to new information. You may create an edge for yourself by identifying when this is likely to happen. There’s of course no such thing as a free lunch, however some of you may be familiar with three day lunches…
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Tags cognitive dissonance - confirmation bias - crowd psychology - dax certificates - derivatives trading - dominant trends - institutional trader - market psychology - three day lunch - trading strategy

Following our mention of sentiment “trigger points” last week, we received several questions on how SentiTrade identifies momentum in market psychology. Normally, trigger points refer to psychological price levels that will “trigger” certain behaviors. For example, if prices of gasoline suddenly rose to €2 per liter, it is reasonable to assume that driving patterns will change. The cost of driving traditional cars, may furthermore “trigger” an increase in sales of hybrid- and electric cars. Read more

Tags asset allocation - bull bear psychology - computer linguistics - confirmation bias - corrective waves - derivatives trading - investment strategy - market prediction - market psychology - market sentiment - overreaction hypothesis - risk on risk off - sentiment trigger point

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