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Occasional Musings from a Stock Market Timer
Human Psychology Moves the
Markets
Price Floors and Ceilings Play
a Big Role
Markets Trend and Do Not Walk
Randomly
These Mathematical Tools Help
Spot Turning Points
The Golden Number
Pattern Recognition
and Timing Signals for Stock, Futures, and FOREX Markets Superior Charting Software for the Serious Trader
Simple Longer Term Approach for
the Average Investor
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Market
Psychology
Nature
is full of various simple and complex patterns. Often a simple pattern
such as the shape of a leaf or the branching of a tree, or the shape of
a snowflake when viewed closely is composed of smaller patterns within
the larger pattern. These smaller patterns are often the same as the
larger pattern. These are called self-similar patterns, or fractals. The
stock markets are complexly patterned and these patterns are fractal.
Why? Markets are comprised of many individuals. This large group of
people make a natural system subject to the complex laws of nature. The
outside conditions that influence markets such as global economies,
geopolitical issues such as war, or election results etc. are always
changing but human nature remains constant. The human nature of fear and
greed combined with supply and demand create the constant fluctuations
in market prices. These fluctuations create observable patterns
reflecting the overall sentiment of market participants. And these
patterns can be observed at all time frames from decades to minutes
which makes them fractal. Many
large markets like the New York Stock Exchange, the Toronto Stock
Exchange, London Stock Exchange, Tokyo Stock Exchange, etc. are
comprised of many millions of individuals (call them the crowd). Each
individual in the crowd has their own reason for buying and selling in
the market. They buy when they expect prices to go up (greed) and they
sell when they expect prices to go down (fear). Some buy and sell at the
right time and others at the wrong time. But remember this is a crowd,
and in a crowd most will do the same thing at the same time as they base
their decisions largely one what others are doing around them. Crowd
psychology is like a mob mentality. It is contagious and irrational. As
prices go up the crowd takes notice, gets greedy, and rushes in pushing
prices higher thus attracting more of the crowd. As prices decline the
crowd gets fearful of a loss and begins to sell. Selling forces the
price down further and the crowd grows more fearful as more and more
rush for the exits. The highest volume of trading is often seen at
market tops and bottoms as a large portion of this irrational crowd buy
at the top when the they are most jubilant and sell at the bottom when
the crowd is in the full grips of fear. This is why many investors loose
money in the markets. This is the psychology of markets. It exists in stock markets, commodity markets, currency markets, real estate markets, etc. A mass psychology of the collective fear and greed of the market participants. It is the essence of market timing. An understanding of the patterns created as the mood of the market switches from optimism (greed) to pessimism (fear) can allow the trader to move in and out of the markets at opportune times. Another aspect of understanding the nature of financial markets at a psychological level is to understand your own psychology. The emotions associated with making, and loosing, money can be very powerful. As a trader in the markets you are, of course, one of the crowd. It is essential to keep your emotions in check while you try to analyze the mass emotion of the market. If you get too caught up in the mood of the market you are doomed to become a part of the crowd that buys high and sells low. Finance News Today offers a wealth of information on Online Stock Investing
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TheMarketTimers.com provides introductory information to
the techniques used for stock market timing. Trading stocks,
currencies, or any security
involves risk. The stock market timing techniques shown on this site can
help control the risks involved in trading. Though these stock market
timing and charting techniques are very helpful for some traders, they
require experience and knowledge of market behavior that comes with
practice. It is advised that traders use
risk management and set loss limits on every trade.
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