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Making Sense Of The
Stock Market
When a person decides to enter the financial markets,
he or she brings years of personal experiences with them.
Those experiences are usually a detriment to profiting
as they are based on one's life experiences. The financial
markets, as well as all freely traded markets from stocks
to commodities, from currencies to tulips, behave in a
much different manner.
Typically, when we first learn how to trade, we study
the markets and try to develop our own personal theories
about how the markets work. Because we don't actually conduct
formal experiments though, we fall prey to psychological
biases.
Those same personal experiences, built over a lifetime,
which helped us to advance and learn in our world, wind
up being the very reason many traders fail to profit.
False Consensus Effect
One of these psychological biases is the false consensus
effect... we tend to wrongly think that others believe
what we believe and do what we will do, but that's
only our perspective and it can mislead us.
Why is it difficult to anticipate what people will do?
Part of the problem lies in the fact that we are mere mortals.
Humans have a limited capacity for understanding complex
information. In some ways, people can process information
better than a computer, but in other ways they cannot.
The false consensus effect is one of those rules of thumb
that may bias our decisions. No matter what decision you
ask people to make, no matter how important the issue,
and no matter what choice is made, social psychologists
have demonstrated that people over-estimate the number
of others who agree with them.
| "...you
can't always anticipate precisely how people will
react to world events. It's all a matter of having
the right perspective, and it can be hard to find
that perspective at times" |
There is a natural tendency to believe that our decisions
are relatively normal, appropriate and similar to what
our colleagues and peers would do in a similar situation.
We use our decisions as an "anchor" and evaluate what
others would do based on what we would do. Decisions based
on "our" life's experiences. Our biases. Our interpretation
of events and their consequences.
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This decision-making bias can contribute to feelings
of over-confidence. Once we make a decision, we tend
to be confident that we are correct and that others will
agree with us, but had we seen the situations from their
perspective, we may see that they would behave quite
differently.
Anticipating What The Masses
Will Do
Many market timers try to anticipate what the masses
will do. Will they buy or will they sell? The crystal
ball method of timing.
But this method has a long history of lost fortunes
behind it. In fact this is the method that gives market
timing a bad name. No one knows the future and even though
they may make a lucky pick, getting the future right
again and again is impossible
You cannot predict precisely how people will react to
world events, economic changes, etc.
But there is a method of timing that has worked for
many years and will continue to work.
The Very Best Timing Strategies
The very best market timers follow market trends. They
wait until the trend in confirmed and then climb on board,
riding it as long as it lasts. If the trend fails, and
some always do, they exit quickly and await the next
trend.
This follows the old market saying, "cut your losses
short and let your winners run." Everyone has heard it
but so few are able to adhere to it.
That is why we follow trends here at Fibtimer.com. We
do not try to forecast the future like other timers do
and usually fail at. We identify trends and take positions
accordingly. If the trend fails we exit quickly. If it
continues, we ride it to the end. That could be weeks,
or even months as profits accumulate.
Following a carefully defined trend following strategy
is the only sure way to be certain you will be in the
right position, at the right time, when the markets take
off in one direction and stay in that direction.
Emotions should have no place in your decisions and
they absolutely have no place in ours.
Unemotional buy and sell decisions, generated by tried
and true trend timing strategies, are the certain road
to profits.
Recent articles from the Fibtimer market timing services;
© Copyright 1996-2017, Market Timing Strategies, Inc.,
All Rights Reserved.
Fibtimer reports may not be redistributed without
permission.
Disclaimer: The financial markets are risky. Investing is
risky. Past performance does not guarantee future performance.
The foregoing has been prepared solely for informational
purposes and is not a solicitation, or an offer to buy or
sell any security. Opinions are based on historical research
and data believed reliable, but there is no guarantee that
future results will be profitable. |
