Trading Psychology
Categories: Financial Theory, Trading
In a nutshell: you want to zig when others zag.
It's a whole science. And lucrative, if you can understand what the market is thinking today, what will spook it tomorrow, and how you invest for your advantage. Darwin would be proud.
Example:
You see headlines from The Wall Street Journal 18 months into a bad bear market, when the market is down 40 percent from its 2-year-ago peaks...decrying "The End of Equities"..."The Market is Dead"..."The Lost Decade." Stuff like that. You realize that a ton of people read the WSJ and actuallly...listen to it, not remembering that its reporters know little to nothing of how to invest well, or they'd be making 500x as much money being professional investors. Instead, they opine on their biased view of what others are doing, so they send a highly clouded picture of the real world to the rest of the world, and they influence market psychology.
If you understand this foible, you can take advantage. And yes, after those ugly two years of down markets,maybe it really is time to get very long the market.
