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BookingAlpha Option Trading Advisory

Sunday, September 13, 2015

The daily fluctuations of your easily influenced mood

The entire world was bearish, and of course the markets went up from 1927.30 to 1961.05 this past week for a solid +1.75% gain. This is why the untrained trader does a disservice to himself by being constantly connected to financial media outlets: CNBC, MarketWatch, Bloomberg, The WallStreet Journal, BNN, Twitter.... In most cases, the unexperienced person ends up a victim of his surroundings and the prevalent opinion of the majority around. If you follow 200 people on Twitter, and 90% are being cataclysmic and seeing the end of the universe right around the corner, you will have a tendency to be bearish and scared as well. Quite possibly making trading decisions based on that bias that you didn't even have to begin with. It was just inoculated in you as a result of your own decision to be influenced by what others are thinking, by actively going out there looking for that which you didn't really need.

You know it's funny, some people that know I'm into this, like to ask me "hey what do you think of the markets these days? Where are we going?". What can you possibly answer to that in order to make them happy and feel good about yourself at the same time? Will my telling you that the markets look weak and I think they will go down cause a life altering event such as you closing a bunch of positions and taking significant losses in your retirement account? Why would you? Why is it so important and such an obsession to know where the market is headed in a day? or in a week?

I'm going to sum it up for you. Typically you will see this: if the market is green on a given day, and the green bar is growing, the Twitterverse and financial media outlets will change their mood to a bullish tone. If it is a red day, and the red bar is growing, the world will change their mood to bearish. Note: These mood changes may and will often happen during the same day, as absurd as that sounds. That's how volatile our brains are. This paragraph has now saved you tons of hours and megabytes on your phone data plan. Just look at the bar of the current day, and you will know what the world is doing and thinking without reaching out to the financial news outlets and reading every piece of market information.

This gem of a trick has saved me hundreds of hours, stress and helped me avoid analysis paralysis. You have paid me a lot of money for reading this "premium" and awesome trick. Go ahead and use it :)

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  1. Great article. I have come to the conclusion that most people including 'experts' don't know what they are talking about when it comes to the markets. I have learned to ignore all of these noise and just follow price action.

  2. good article, no one knows the future , otherwise we would have retired while ago

    1. Only from the day job; I'd keep trading . . .

  3. I absolutely agree with you here. If you listen to all the noise in the news, it's impossible to make positive expectancy decisions. I read something a while back that said we perceive more pain from a $100 loss than joy from a $100 gain.

    If we obsess over what people say is driving markets, we totally miss what matters in trading. Some of my best periods of trading have taken place when I had no idea what was going on in the world. Good stuff, thanks for the tip!