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Irrational

End of an era: Big fear is out of the marketWhat a wonderdul week! I have been buying since October so you bet I enjoyed it, first I started with the tech indice, I even bought the very bottom of that consolidation area, nice. I expected the "uncertainty" to be over and optimism to come back 1 at a time. But the nasdaq indice was not doing that great - it went up but weak - so I switched to the S&P 500 (and also was in Bitcoin which did really well since $12000 but it got banned so I had to get out). And for 6 months I have seen bears suffer. Some of them post articles, ideas, videos. It's a running gag, where everyday they come up with something even more apocalyptic they run out of ideas to make it even more negative than the last day. "It's even worse than I thought everything about to collapse our food stores are running dry we will all starve to death". My ideas from 6 months ago: We can look at the commitment of traders: It's still the same institutions that have been hesitant and skeptical literally since the 2009 bottom, 12 years later are still skeptical, even net short. Jim Cramer only look at zoomed in daily charts? This guy is in show business now, so I'm going to have to assume he does drugs. These institutions they're really short? Or Short the future and invested in all sorts of stocks? I already know the answer but it seems so unreal. Prices have been going up for 12 years and they STILL are sellers. "Ooooh it's coming". With buyback programs the biggest buyers by far. And the FED is printing to make sure it goes up, what kind of idiots are fighting this? Maybe the US will soon become Weimar Germany and the stock market will do a 10X (after ajusting for inflation) like the German one did. Bears are suffering and are on the edge. Sometimes I think 99% of market participants "pros" included just holds bags forever and adds to them and never cuts losses. Humans own the planet, now they have to evolve into a predator mentality rather than this holding onto losers forever fight to survive the predators. Bears are the enemy. You may be my friend but if you are a short seller now you are my enemy. The enemy is suffering as we bulldoze our way through. The price not only is going up now throwing them some hope with a little red candle here and there, it is going up in a straight line. The pain is maximum. Bears are like the average human, I'd like to think the losing mentality "never give up" emotional human is underrepresented in the markets, but there are still many and besides it's not binary, it is sort of a spectrum, everyone has some of it, some more some less, and under enough stress maybe we all suck. Bears rather than cut their losses and get a 100% certainty small loss, rather hold on, even add, for a chance (1%? XD) to not take a loss, even if this means risking taking a much larger loss. From this point it's no longer about logical pricing, it's about pain and how much of it can bears take. When the fear index has a high period then drops back to normal, the S&P price usually goes really far. How much pain can they take? 5000 points? More? As I said bears are our enemy. Our goal is to destroy them, run them over like a hoard of rhinos, obliterate every last bit of hope they have. Each tick higher, and each time they clic on "sell" the pain grows and they get weaker. Each tick higher, and each time we clic on "buy" we end in an even better, stronger, more comfy, position. And each bear that falls makes us stronger. This is an uphill battle for the bears. We continue to press our advantage until the last bear falls. No quarter, no letting down the pace. We hit harder and harder, we go up faster and faster. Rest in piece short sellers. Hey and after bears capitulate and this goes parabolic I expect a big correction, might be good to sell and buy back lower at some point. The VIX after so long "fear" only just went below 20 and it's way too early, we are barely entering optimism, there is a long long way to go before mainstream media and Jim Cramer have a "thrill" posture / admit we are in a bull market. A long long way to go...
TVC:VIX
by MrRenev
7
6 IRRATIONAL BEHAVIOR AND THINKING PATTERNS - THINKING CLEARLY !Hello everybody and welcome, I hope you'll have a pleasant time reading this. And I also hope it'll somehow be useful to you. --------------------------------------------------------------------------------------------------------------------------------- Let's face it, your biggest enemy in trading is not the market, not the hedge funds, not the banks, it's you. Thinking clearly is one of the hardest things to do when trading/investing. We've all, at least once, done something and asked ourselves afterwards, "why did I do this ?" or "how didn't I see this" ? Did you know that this is called the "Hindsight bias" ? Yes, it's a well-known phenomenon in psychology. Before we begin, let me explain the diagram. Developing clear thinking takes time. You'll find it very hard at first, but as time goes by, if you keep your focus on it, you'll notice your performance increasing exponentially (this also applies to your life in general !). --------------------------------------------------------------------------------------------------------------------------------- 1. Confirmation bias The confirmation bias, is the distortion of information to make sure that it fits our beliefs. Let's think about it that way : if you think that the world is an awful place, you'll find facts to back your belief about the world. What happens when you encounter a fact that denies your belief ? You either ignore it or distort it in order to make it fit your belief. It's about the same thing when you're trading. Sometimes, especially new traders, hold bags, meaning that they hold on to losing positions for a long time, hoping for a recovery. No matter what, the trader will find himself putting more weight on the information that confirm his belief (that he's right) and will ignore the information that refutes it (that he's wrong and should sell). In order to avoid the confirmation bias, you need to weigh every new information the same way . 2. Hindsight bias The hindsight bias, is directly correlated to the confirmation bias. We tend to understand things better in hindsight than we do in the present moment. To take the previous example of the trader that holds bags a little further : what happens when the trader decides to cut his losses ? He immediately says : "Oh, all the information I had indicated a clear downtrend, why didn't I cut my losses earlier ?". The hindsight bias. In hindsight, everything appears to make sense. In Trading, the best way to avoid this bias, is to react to the market information that's available to you, rather than trying to predict it or to hope for something to happen. In other words, when you have an edge, you trade your edge and you remain open to any information the market gives you, be it information that confirms or invalidates your initial belief. 3. Loss aversion We feel better losing nothing than winning something - say hello to loss aversion. Overall, humans are more sensitive to negative things than to positive things. Think about how much we complain. Sometimes, it's justified, but often it isn't. We complain about things we don't have, but omit to be grateful for everything we have. In trading, loss aversion, is the pattern that makes us hold on to a losing position for a long time. After all, an unrealised loss is less painful than a realised one. To avoid loss aversion, you have to work on your mindset and start thinking in probabilities. 4. Outcome bias This is another very, very important psychological trait that messes with our trading. Human beings tend to judge a decision by its outcome, rather than gauging the decision process. In the best case scenario, you have an edge and you act on that edge every single time you see it appearing on a chart. The problem is, because trading is all about probabilities, sometimes, your edge won't work. Does this have something to do with the process ? Absolutely not, it's just how trading works. But, when you aren't aware of it, you start questioning your trading strategy, even though, the outcome is not correlated with the process. Just be aware that the outcome is not a reflection of the process . 5. Action bias Whenever we do something to compensate for our inaction, we fall for the action bias. We rather do something useless than nothing at all. If you watch football, you've probably witnessed this bias a lot of times. When the opposing team shoots a penalty, the goalkeeper, either dives left or right, even if chances are that the opposing player shoots right in the middle. Why ? Well, diving looks way better than just standing still, whatever the result is. As Jesse Livermore would say, " Money is made by sitting, not trading ". Considering this bias, for us human beings, it is hard to sit and do nothing. Just think about what you do when you have to wait, be it in a waiting room or at the bus stop. This could be an explanation why most traders fail. They struggle letting their trades unfold and get caught into thinking that their inaction is harmful. Eventually, they end up overtrading, taking trades they otherwise wouldn't, to avoid inaction. "All of humanity's problems stem from man's inability to sit quietly in a room alone", Blaise Pascal. 6. Overconfidence effect Overconfidence is a very evil trait to trading. When we are overconfident, we tend to overestimate our knowledge and take bigger risks. Financial markets are unforgivable with overconfidence. Markets really are unpredictable, therefore we shouldn't even try to predict them. We need to go with the opporunities that the markets make available to us . The best traders are aware of it, therefore they try to be humble and respect the markets. As an example, we could imagine a trader that is on a 5-trade winning streak. He feels great, he feels invincible. What happens ? He takes bigger risks and one day he'll inevitably issue a huge loss.
BITSTAMP:BTCUSDEducation
by UnknownUnicorn6734025
4
NIFTY weekly view July 27 -31Update to structure and certain assumptions that proved wrong I was thinking that the 10700-10920 area won't be crossed easily. But it was crossed with 2 gaps. And in two days NIFTY is near the 11200 area. For the last few weeks, I have been putting a structure of rising wedge that does not look valid. There are too many divergences and it is not a clean technical pattern as I like. Hence I am removing that structure and just trying to understand NIFTY with the typical ‘Buy the dip’ structure. I was also wrong about regime change that I talked about a week before. Market is still in uptrend and showing some different signs, which I’ll explain later in the post. ================================================================================================================================================================== Some observations about NIFTY In the current up move, NIFTY has moved 7500 to 11200, that is 3700 point rise. That is close to 50% in just 4 months. NIFTY has been rising 6 consecutive weeks. Reactions to results have been largely over enthusiastic. Example stock like Infosys increased 40%. There has been a stock which has been darling of the investor ~ Reliance Industries showing gain of 13% in a week. NIFTY price to earnings ratio is 29.35. This is really a roaring bull market in the shortest time. ================================================================================================================================================================== Some behavioural observations Retail participation increased. There are many ‘Guru’s selling their great services and their clients making money for the last 4 months. Brokers showing a surge in new account activity and new money is flowing into trading. At the same time mutual funds are having a tough time with inflows. Many retail participants, who are usually on the long side of the market, are being successful following simple 'buy' strategy ================================================================================================================================================================== What is next? All these indications are pointing towards a situation of some kind of bubble. Like all bubbles, I do not have idea when this is going to end. This is going to end because this is the kind of situation where no seller is interested in selling. Market always functions on the fight of buyers and sellers and the balance of power between them It is not possible to catch the exact top. It is also not possible to understand when the market is close to the top. ================================================================================================================================================================== What retail traders and investors can do? As an investor, definitely do not invest in such situations. It is better to stay away from fresh investments. Also for rule based investors, this is the time to definitely change allocation from equity to other asset classes. It is difficult to short the market at the correct time, and especially in these kinds of bubbles. Because the shape and structure of the top is not really well formed or with a known pattern. ================================================================================================================================================================== My view for next week I feel there are few very important levels, yet to be crossed. One such level I am watching is 11269, 11370 and then 11600. There are chances that NIFTY may show picture perfect reversal at these levels. So it is better to attempt limited risk shorts at these levels. For reliance, 2250-2350 is the zone where technical reversal is possible. The chart shows the possibility of breakout which can go to 11270 and 11370 levels. ================================================================================================================================================================== My trade plan for next week Intraday avoid getting short Avoid short positions which are not at significant levels or naked option sell positions. Avoid futures Buy Puts at important levels and be prepared to lose money with it. To balance the put position, have an intraday long position either through buying calls or selling lower strike puts. That's all for the week!
NSE:NIFTY
by Observe_Think_Act_Think
4
FIVN: Either to break to new ATH, or get pulled back to 200 maThe weekly looks bearish unless it can breakout... the daily confirms H&S, plus has already touched down on 50ma -- that 90ma is weakkk support, so if it falls (through cloud), then it will drop sharply back to 200ma, and then likely build up tons of support here and continue back up. I say this because this market is clearly irrationally bullish, and this company is apparently a leader in its industry. Personally, I feel the entire market should still be down since initial pandemic drop. That pullback was NOT just b/c of COVID-19 -- market was due for MAJOR correction for months leading up to that... honestly, maybe the good part of last year, but MM's and irrational bulls pumped AAPL and TSLA to the moon before dumping. Once market initially crashed, to squeeze options contracts and hedge losses, it was artificially propped and then pumped back up to "breaking point" of bullish territory, and now likely dragging out next inevitable drop for same reasons. Be careful with long positions -- either blow off top rally to come to squeeze out shorts, or just falling right away... get your popcorn and puts ready, and add in increments for optimal gains. *NOT ACTUAL TRADING ADVICE*
NASDAQ:FIVNShort
by ogdabber
PTON retracement this is pretty dumb. last times RSI was this high the stock made a 20% correction back to the mean ~$30. Also made tops in RSI in the daily time frame as well. Long time support in green, weak supports dashed green lines. Fundamentals: PTON sells overpriced electric cycling bikes during a recession. The market is as rational as a chicken without a head. PTON recently rallied after breaking the descending triangle marked in purple due to their increased sales of bikes due to the lockdowns. now that lock downs are being removed, its very likely people will stop ordering them and the hype dies. I think its very possible that this stock gets carried back to its ATH on a positive market and even higher. this is an isolated test of the RSI indicator. PTON 28p 6/19 dyor.
NASDAQ:PTONShort
by Jorji