Trading Psychology: trading markets via Mass Psychology

Trading Psychology

Updated August 2020

Trading Psychology; Ignore the Noise

Information overkill is the reason we don’t inundate your inbox with updates, and this applies both to our paid subscribers and to subscribers of our free Newsletter.  We are already inundated with too much unnecessary junk. On any given day you will find experts telling you why the markets are destined to soar and why they are destined to crash, so how is anyone supposed to make any sense of this.  News outlets are desperate for eyeballs, so they are going out of their way to make titles bombastic, and or offering multiple scenarios so that when one of them comes to pass, they can proudly state we told you so.

Faulty Perceptions lead to  Faulty Outcomes

Trading Psychology; faulty perceptions lead to faulty outcomes

The problem is that in most cases the information used to back these scenarios is on par with toilet paper.  At this point, we will stop and make another prediction. The masses are getting tired of bombastic crap being put out by places such as Yahoo, Market watch, the street, Huffington Post, etc.

We have been monitoring all these sites and for the past 12 months, they have been steadily losing eyeballs no matter what crap they try to market.  We have also noticed overseas news outlets are moving up in rankings.

There is a big paradigm change in the works. People want to hear the truth; they want a story to have some meat, no matter how short that story is, and they are tired of being tricked to click on a link only to find out that the title was the best part of the story. Today’s reporters like mindless bots assume they can continuously employ the same approach, and the masses will embrace them with the same gusto as yesteryear.

 Key Trading Psychology Rule; Live within your means

Key Trading Psychology Rule; Live within your means 

This brings us to a very important point.  The problem with the world today is that is over 90% of the world especially in the West; want to live the life of a king but on a soldier’s salary. They want to buy things they don’t need, with money they don’t have to impress people they hate with their guts.

Why would they want to do this? The idea is to give their enemies the illusion all is well. We have news for these moron’s; you don’t climb in life by impressing your enemies. The focus should be on making yourself better and or the product/service you are selling better.

You see this trend everywhere. The first sign that a massive new trend change was underway was when Obama a nobody was elected president. He had no experience; he was just a fresh senator; decades of tradition were broken and thrown into the toilet.  Now this year we have Terrible Cruz, Rowdy Rubio, insane Hillary, hopeless Bernie, etc. all trying to run for president. With such a terrible line-up, loudmouth Trump starts to look good. After all, he has some business savvy and is to some degree an outsider.

Trading Psychology Rule 2: Focusing on the Noise is dangerous

We are not endorsing Trump; we are just illustrating a trend in motion.  Take this a step further, college students want to go to the top colleges, and they want their parents to pay for it. What happened to the day you went to the college you could afford, and you worked to pay for all of it or, at least, helped your parents.

Let’s move to the workforce, most workers from top to bottom want to do as little as possible but want the highest possible reward. Today’s corporate officers are looking for ways to improve EPS (earnings per share) without doing any hard work or coming out with any innovations. The trick, borrow money on the cheap and use it to buy back shares thereby magically boosting the EPS.

Two elements necessary for a Con to work

We have always stated that for any con to work you need two elements the conman and the person willing to be a victim. The share buyback scam continues because the public does not care what method is used to boost earnings as long as earnings look great. If shareholders cared, they would have made a noise long ago.  If you look everywhere, you see this trend of doing nothing and wanting everything is gaining traction.

What made the baby boomers great and all those that came to the U.S decades ago? Everyone worked hard; there were no handouts, today’s generations want the best of the best, but they do not want to pay for it.  On that note, a superpower holds onto its position for roughly 250 years before it is replaced. America has held that position for slightly over 240 years, so the end is near.

Law of balancing

This law states that the more you do, the less you will receive as the equation must balance. That is why most good Samaritans end up dead before their time, and this is also the reason most heroes die young. It is not bad to help someone, but you should never attempt to help those that do not want the help or do not seek it; the only exception being young children.

This stock market is supposed to crash and burn

This is why it will not; it will crash (more like a very strong correction) one day, but that day is not upon us yet. The markets will most likely trade a lot higher than any of these naysayers could ever envision.  The Fed is far more powerful than a few hundred loud mouths that claim to be experts but, in reality, know next to nothing. Instead of listening to rubbish, try to focus on putting the “Trading Psychology” concepts discussed in this article.  Mass psychology states that a market will crash only when the masses are euphoric and vice versa.


Forget bombastic titles and ignore the spin doctors; look for outlets that focus on the real issues at hand and describe things how they are and not how they should be.  In terms of the market focus on the trend and spurn the noise. At the end of the day, the trend is supreme to all the crap that the experts are busy spewing.

If these experts really knew what they were talking about, they would not appear on TV trying to sell you crap you don’t need at a ridiculously inflated price; instead, they would be at a lovely resort enjoying all the gains they were banking from the trades they were making. But 90% of experts are not doing this, so it means they don’t know what they are talking about and hope that you don’t catch on to their con game.

Random Thoughts on the  subject of Trading psychology

Peace of Mind; focus on the trend

The psychological aspect of trading is extremely important. Traders often dart in and out of stocks on short notice, necessitating quick decisions. To accomplish this, they need a certain presence of mind. They also, by extension, need discipline, so they will stick with previously established trading plans and know when to book profits and losses. Emotions simply can’t get in the way. (To read more about trading psychology, see “Master Your Trading Mindtraps.”)

Focus on the trend for everything else is just noise.

To get their heads in the right place before they feel the emotional or psychological crunch, investors need to create trading rules. They should lay out guidelines based on their risk-reward tolerance for when they will enter a trade and exit it – whether through a profit target or stop loss – to take emotion out of the equation. Additionally, a trader might say if certain news, such as specific positive or negative earnings or macroeconomic news, comes out, then he or she will buy or sell a security.

Traders would also be wise to consider setting limits on the amount they are willing to win or lose in a day. If the profit target is hit, they take the money and run, and if losing trades hit a predetermined limit, they fold up their tent and go home, preventing further losses.

Traders should learn as much as they can about their area of interest, educating themselves and, if possible, going to trading seminars and attending sell-side conferences. investopedia

Be consistent

Great traders are simply excellent system followers. Consistently profitable traders have found an edge and they exploit it repeatably. Not by doing random things, but by following a method they have practised hundreds if not thousands of times in all sorts of market conditions. They follow their system no matter what pops into their head telling them to do otherwise.

Mass psychology holds the key:  understand the emotion driving the market and the rest is easy

One main rationalization traders make is that they don’t need a system because they are great traders. They believe they can make money acting on impulse, on their wits, instead of following a proven plan. This may work for a time, but these traders don’t last.
Only takes trades you have practised hundreds of times getting into and out of. Don’t take a trade because you tell yourself “I’m good, I can make some money here.” You have no plan for how to handle this trade, and no data that indicates what you are about to do has a statistical edge. Full Story

Trading psychology

The field of active trading is a challenging, fast-paced environment with nearly infinite possibilities and pitfalls. The odds are seemingly stacked against active traders in the marketplace, with studies suggesting that upwards of 80% consistently lose money and only 1% achieve predictable, long-term profitability.1)

With four out of five traders showing regular losses, it’s a wonder anyone is willing to pursue a career in the trading industry. After all, it’s not typical for an individual to invest time and money into a business that has an 80% chance of failing. So, why the attraction to active trading as a profession?

The answer lies in the benefits that success in the marketplace can provide to prosperous traders. Financial independence, self-empowerment and an escape from an unsatisfying career are a few perks enjoyed by those who beat the odds and grasp the brass ring.

Longevity in the marketplace among new traders is predominantly fleeting

. Academic studies focused upon the length of time new traders remain active show that nearly 40% last one month in the market and only 7% remain active after five years.2)

In addition to the short trading career, a novice trader’s entrance into the financial markets can also prove expensive. The amount of monetary loss sustained by a new trader during his or her introduction into the marketplace can vary wildly and is ultimately dependent upon how much capital is at the trader’s disposal. In addition, reckless implementation of leverage by an inexperienced trader can rapidly turn a manageable drawdown into catastrophe.

While it’s true that active trading produces many more losers than winners, the possibility of success does exist. Personal anecdotes of financial gain, the impressive track records of famous investors and profiles of day traders who took small amounts of venture capital and subsequently built fast fortunes are easily found through some basic research of the trading industry.FXCM.Com

Trading psychology and the secret desire to lose syndrome

Unfortunately, is what drives most investors today. Notice how everyone is always happy to talk about a miserable situation and how very few get any joy from examining a positive situation.  We seem to have an affinity for negativity, and this is what most investors need to overcome if they are going to stand any chance of winning in the markets.

We will examine this topic very briefly because it does play an important role in investing. Individuals, as a rule, seem far more inclined to listen to and act on negative information rather than on positive info. Don’t believe me; allow me to illustrate this point to you.

We have four glasses of water on the table. Someone states that the water in one of the glasses came from a Jug that had a dead fly in it. Now mind you, you don’t even know this person, yet immediately almost everyone would walk away from those glasses, even if they were dying of thirst. Almost no one would try to verify if this information was indeed true.

Now someone comes to you and states, hey one of those glasses contains water from the purest spring in the Swiss Alps. I am almost sure that no one would rush to drink all four glasses in an attempt to secure the purest water. Tactical Investor

Final notes on Trading Psychology

Life is not static and neither is trading. Life is what you make of it and the same concept can be applied to the “trading psychology” debate.  If you deem the markets are a place to lose money; then you wish will come true for you will approach experts that create false narratives of an impending market crash. If on the other hand, you are overtly bullish, you will follow experts who state that the current bull market will last forever and that’s never true. Case and point; the Bitcoin crash of 2018. Experts were issuing lofty targets of one million, shortly after hearing this nonsense we stated that this rubbish advice indicated that a top was near at hand.

Two simple rules to follow

Purchase stocks when the masses panic and vice versa

Follow the trend for it’s your friend as everything else is your foe

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