Algorithmic trading, aka algo-, black-box or robo-trading is using automated computer software to create market orders. The computer algorithm decides on timing, price, position sizing and can be executed without human intervention. In recent years, large pension funds and institutional traders have implemented algo-trading to minimize market impact, i.e. divide large trades into smaller orders. Read more

Tags algo trading - algorithmic trading - black box trading - bull bear psychology - confirmation bias - crowd psychology - investor psychology - market prediction - market psychology - risk on risk off - robo trading - sentiment average - sentiment momentum

That Mr. Wouldhave and Mrs. Couldhave are the most successful investors of all times, is hardly breaking news. That the 20 day SentiTrade average anticipated the current market downfall is however, breaking news.

The method behind SentiTrade’s market sentiment indicator, is simply to calculate the ratio between positive and negative news items. Our fully automated computational software takes care of the hard part, namely reading and assessing whether the news is bullish or bearish. Read more

Tags asset allocation - behavioral finance - bull bear psychology - investor psychology - market sentiment - sentiment trigger point - sentiment volatility - system trading

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

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