Yesterday, we witnessed a 2,5% drop on the DAX within the course of 5 minutes. There wasn’t a single news story that explained the sudden drop, so conspiracy theories and rumors naturally had to surface. Surely it was a “robot” that had run amok, or was it the immanent downgrade of Germany, or (non-existing?) rockets fired at Eliat in Israel… Read more

Tags corrective waves - derivatives trading - dominant trends - market psychology - robot crash - sentiment volatility

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

In a recent post we discussed SentiTrade’s realtime market sentiment calculations and how this could be used to anticipate intraday market moves, particularly in early trading. Today we’ll show how SentiTrade’s end-of day values may be used for taking positions with a somewhat longer perspective. First, SentiTrade’s end-of day calculation issues at 08.55 just before Read more

Tags behavioral finance - bull bear psychology - crowd psychology - dominant trends - excessive investor pessimism - market psychology - market sentiment - market sentiment values - sentiment analysis - trading strategy

The Elliott Wave Principle states that markets move in natural patterns according to changing investor psychology and price momentum. Specifically, crowd psychology will move from optimism to pessimism, and back up again, making it possible to forecast the progression of certain market trends. Elliot’s model states that the trends move in a total of 5 waves. In a bull market a dominant trends is found in wave 1, 3 and 5, whereas waves 2 and 4 will be corrective waves (see illustration below).
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Tags corrective waves - crowd psychology - dominant trends - investor psychology - market trends - pattern recognition - psychology trends