In our previous post we discussed a trading strategy that anticipates a take profit scenario on Friday afternoons. This week we present a strategy that will help you position yourselves ahead of the Dow open. By using SentiTrade’s market psychology data, we calculate the statistical probability of a U.S. market up or down opening. Read more

Tags bull bear indicator - dominant trends - Investment choices - investment strategy - market trends - pattern recognition - system trading - trading strategy

By increased sentiment volatility, i.e. when news events swing from hope to doom and vice versa, does a “risk on” situation emerge? One may of course calculate volatility on practically any instrument. Generally, high volatility is express nervousness and is frequently associated with sharply falling prices.
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Tags bull bear - bull bear psychology - corrective waves - dax index - excessive investor optimism - investment strategy - market reversal - sentiment analysis - sentiment volatility

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