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Greed

Fighting Emotions: Overcoming Greed and Fear in the MarketThere are moments in life that remain etched in memory forever, dividing it into "before" and "after." For me, that pivotal moment was the fateful day I lost an enormous sum of money—enough to live comfortably for 3–5 years. This loss was not just a financial blow but a deep personal crisis, through which I found the true meaning of trading and life. When I first embarked on the trading path, success came quickly. My initial trades were profitable, charts followed my forecasts, and my account grew at an incredible pace. Greed subtly crept into my heart, whispering, "Raise the stakes, take more risks—the world is yours." I succumbed to these temptations, ignoring risks and warnings. It felt as if this success would last forever. But the market is a force of nature that doesn’t tolerate overconfidence. On what seemed like an ordinary day, everything changed. Unexpected news rocked the market, and my positions quickly went into the red. Panic consumed me, and instead of stopping and accepting the losses, I decided to recover them. That mistake cost me everything. In just a few hours, I lost an amount that could have secured my life for years. I stared at the screen, unable to believe my eyes. My heart was crushed with pain and despair. In that moment, I realized that greed had brought me to the brink of ruin. After that crash, I was left in an emotional void. Fear became my constant companion. I was afraid to open new positions, afraid even to look at the charts. Every thought about trading filled me with anxiety and regret. I began doubting myself, my abilities, and my chosen path. But it was in that silence that I started asking myself important questions: How did I end up here? What was driving me? I realized that greed and a lack of discipline were the reasons for my downfall. Understanding my mistakes, I decided not to give up. I knew I had to change my approach not just to trading but to life as well. I began studying risk management, trading psychology, reading books, and talking to experienced traders. Key Lessons I Learned: Acceptance of Responsibility : I stopped blaming the market or external circumstances and took full responsibility for my decisions. Establishing Clear Rules : I developed a strict trading plan with clear entry and exit criteria. Emotional Control : I began practicing meditation and relaxation techniques to manage my emotions. Gradually, I returned to the market, but with a new mindset. Trading was no longer a gambling game for me. I learned to accept losses as part of the process, focusing on long-term stability rather than quick profits. Risk Diversification : I spread my capital across different instruments and strategies. Continuous Learning : I invested time in improving my skills and studying new analytical methods. Community and Support : I found like-minded people with whom I could share experiences and get advice. That day when I lost everything became the most valuable lesson of my life. I realized that true value lies not in the amount of money in your account but in the wisdom and experience you gain. Greed and fear will always be with us, but we can manage them if we stay mindful and disciplined. Takeaways for Traders : Don’t Let Greed Cloud You r Judgment: Set realistic goals and celebrate every step forward. Fear is a Signal : Use it as an opportunity to reassess your actions and strengthen your strategy. Risk Management is Your Best Friend : Always control risks and protect your capital. My journey was filled with pain and suffering, but it was these hardships that made me stronger and wiser. If you are going through difficult times or standing at a crossroads, remember: every failure is an opportunity to start over, armed with experience and knowledge. Don’t give up. Invest in yourself, learn from your mistakes, and move forward with confidence. Let your path be challenging, for it is through overcoming obstacles that we achieve true success and inner harmony. Your success begins with you. If you enjoyed this story, send it a rocket 🚀 and follow to help us build our trading community together.
Education
by VctMid
1
This One Emotion Could Be Destroying Your Trading ProfitsIn the world of trading, emotions play a pivotal role in shaping decision-making, and one of the most powerful and potentially dangerous emotions traders face is GREED . Greed, when left unchecked, can lead to impulsive decisions, high-risk behaviors, and significant losses. On the flip side, mastering greed and learning to manage it can make you a more disciplined and successful trader. In this article, we will explore what greed in trading looks like, how it affects performance and practical strategies for managing it. Greed in Trading? Greed in trading is the overwhelming desire for more – more profits, more wins, more success – often without regard to risk, logic, or a well-structured plan. It can manifest in different ways, such as overtrading, chasing unrealistic returns, holding on to winning positions for too long, or abandoning a proven strategy in the hope of making quick gains. How Greed Manifests in Trading: 📈Overtrading: A greedy trader may take on far more trades than necessary, often without proper analysis or risk management, simply to increase exposure to potential profits. Overtrading increases transaction costs, dilutes focus, and leads to emotional burnout. 🏃‍♂️Chasing Profits: Greed can cause traders to chase after price movements, entering trades impulsively based on fear of missing out (FOMO). This often leads to poor entry points, increased risk, and diminished returns. ⚠️Ignoring Risk Management: A greedy trader might ignore risk parameters like stop losses or over-leverage positions, believing they can maximize profits by taking on more risk. This is a dangerous path, as a single market movement in the wrong direction can wipe out large portions of capital. ⏳Failure to Exit: Holding on to winning trades for too long is another sign of greed. Instead of securing profits according to a trading plan, traders might hold positions with the hope that prices will continue to rise indefinitely, only to see their gains evaporate when the market reverses. How Greed Affects Trading Performance Greed can distort your decision-making process. It leads to overconfidence and clouds judgment, causing you to believe that the market will always behave in your favor. This overconfidence pushes traders to abandon their strategies or take unnecessary risks, resulting in: Emotional Trading: The trader begins to react emotionally to every small market movement, making decisions based on feelings rather than rational analysis. Impaired Risk Management: Greed often blinds traders to the importance of managing risk, which is the backbone of long-term trading success. A single high-risk move inspired by greed can erase months or years of gains. Missed Opportunities: By focusing on unrealistic gains or trying to squeeze every bit of profit from a trade, a trader may miss more reliable and smaller, but consistent, opportunities. The Psychology Behind Greed Greed is rooted in our psychology and is amplified by the very nature of the financial markets. Trading offers the possibility of instant gains, which triggers a dopamine response in the brain, making us feel rewarded. The lure of quick profits encourages traders to take greater risks or deviate from their trading plans in pursuit of bigger wins. However, the emotional high from successful trades is often short-lived. Traders can become addicted to this feeling, pushing them to take on more trades or stay in positions for longer than they should. Eventually, this leads to bad habits and unsustainable trading practices How to Manage Greed in Trading While greed is a natural human emotion, it can be controlled with the right mindset and strategies. Here are some practical ways to manage greed in trading: 1. Set Realistic Goals The first step in managing greed is setting clear, realistic trading goals. Rather than aiming for massive, one-time profits, focus on steady, consistent returns. Define what "success" looks like for you on a daily, weekly, and monthly basis. Having measurable goals helps anchor your trading behavior and keeps you grounded. Example: Instead of aiming for a 100% return in a short period, set a more achievable target like 5%-10% monthly. This may not sound as exciting, but it's more sustainable in the long term. 2. Stick to a Trading Plan A well-defined trading plan is your safeguard against impulsive decisions driven by greed. Your plan should outline entry and exit points, stop-loss levels, and risk-reward ratios. By adhering strictly to your plan, you can resist the temptation to hold on to trades longer than necessary or jump into trades impulsively. Key elements of a good trading plan include: -Entry and exit criteria are based on analysis, not emotion -Risk management rules (like how much to risk per trade, stop-loss settings) -Profit-taking strategy, deciding when to lock in gains 3. Use Risk Management Techniques Effective risk management is the antidote to greed. By setting strict risk parameters, you limit the impact of poor decisions driven by emotions. Always use stop-loss orders to protect yourself from significant losses, and never risk more than a small percentage of your trading capital on any single trade (example 1-2%). Avoid over-leveraging, as leverage amplifies both profits and losses. While it may be tempting to use high leverage to chase bigger gains, it significantly increases the risk of catastrophic losses. 4. Take Profits Regularly One way to counteract greed is to develop a habit of taking profits regularly. When you set profit targets ahead of time, you can ensure that you lock in gains before they evaporate. Don’t wait for an unrealistic price surge. Exit trades once your profit target is reached, or scale out by selling a portion of your position as the trade progresses. 5. Practice Emotional Awareness Being aware of your emotional state is crucial in trading. Take the time to self-reflect and recognize when greed is influencing your decisions. Keep a trading journal to track not just your trades, but also your emotions during the process. This will help you identify patterns and emotional triggers that lead to poor decisions. Example: After a series of winning trades, you may feel overconfident and tempted to take bigger risks. By noting this in your journal, you can remind yourself to remain disciplined and not deviate from your plan. 6. Focus on Long-Term Success Trading is a marathon, not a sprint. Focus on the long-term process rather than short-term profits. Greed often leads traders to forget that consistent, small gains compound over time. By shifting your mindset to long-term wealth-building, you’re less likely to take excessive risks or engage in reckless behavior. Greed is a natural emotion in trading, but it can be highly destructive if not managed properly. The key to success lies in discipline, risk management, and a well-structured trading plan that aligns with your goals. By understanding the psychological drivers of greed and taking proactive steps to control it, traders can make more rational decisions, protect their capital, and increase their chances of long-term success.
CRYPTO:BTCUSDEducation
by HexaTrades
Trading &/or GamblingThe difference between trading and gambling. This article will shine a light on the most frequent mistakes that traders make. These mistakes blur the thin line between trading and gambling. Many people have spoken on this topic, but we truly believe that it is still not sufficient, and traders should be better educated on how to avoid gambling behaviour and emotional outbursts. When we speak about trading versus gambling, we define gambling as the act of making irrational, emotional and quick decisions. Most of the time, these decisions are based on greed, and sometimes fear of the trader. Let’s dive into the exact problems we have personally experienced thousands of times, and want to help others avoid. 1 ♠ Bad Money Management This is something that everyone has heard at least once, but seems to naively ignore in the hopes that it is not that important . It is the most important . When a trader enters trades, it is exceptionally alluring to enter with all of their money, or close to all of it. In gambling terms, that is going “All in”, or “All or nothing”. As a rule of thumb, both traders and gamblers should only place or bet money that they can afford to lose. Thankfully, at least in trading one can limit their loss for that specific trade, by placing a stop loss or exiting before total liquidation. In Poker, you can’t fold when you are “All in” and take a portion of your money back. However, that does not mean entering trades with full capital, even with a stop-loss, is going to give you exponential returns and feed your greed for profits. Traders should enter positions with a small amount of their full capital, to limit the damage from losses. Yes, you also limit the possibility that you win a few trades in a row with all of your money and… There goes the greed we mentioned. The “globally perfect” percent of equity you need to enter trades to reach that balance between being too cautious and too greedy does not exist. There are methods, like the Kelly Criterion, as described in our previous Idea (see related ideas below), that help you optimize your money management. Always ask yourself, “How much can I afford to lose?”. Aim for a balanced approach. This way you can position yourself within the market for a long and a good time, not just for a few lucky wins. Greedy money management, or lack thereof, ends in liquidations and heartbreak. 2 ♣ The Use of Leverage Anyone who has tried using leverage, knows how easy it is to lose your position (or full) capital in seconds. Using leverage is mainly sold to retail traders as a tool for them to loan money from the exchange or broker and bet with it. It is extremely profitable for institutions, since it multiplies the fees you pay them ten to one hundred-fold. In our opinion, leverage isn’t something that should be entirely avoided. However, it should be limited as much as possible. We cannot deny that using 1-5x leverage can be beneficial for people with small accounts and a thirst for growth, however as the leverage grows, the more of a gambler you become. We often see people share profits made using 20+ times leverage. Some even use ridiculous leverages within the range of 50-125x. If you are doing that, do you truly trust your entry so much that you believe the market won’t move 1% against your decision and liquidate you immediately? At this point, the gambling aspect should be evident, and it goes without saying that you should not touch this “125x Golden Apple”, like Eve in the Garden of Eden. Especially when you see a snake-exchange promote it. If you use a low amount of leverage, and grow your account to the point where you don’t need it for your personal goals in terms of monetary profit. You should consider stopping the use of it, and at least know you’ll be able to sleep at night. 3 ♥ Always Being In A Position Always being either long or short leads to addiction and becomes gambling. While we don’t have scientific proof of that, we can give you our own experience as an example. To be a profitable trader, you do not need to always be in a position, or chase every single move on the market. You need to develop the ability just to sit back and watch, analyse and make conscious decisions. Let the bad opportunities trick someone else, while you patiently wait for all your pre-defined conditions to give you a real signal. When you think of trading, remember that the market has a trend the minority (around 20-30%) of the time. If you are always in a position, this means that 70-80% of the time you are hoping that something will happen in your favour. That, by definition, is gambling. Another aspect, that we have experienced a lot, is that while you remain in a position, especially if you have used leverage, you are constantly paying your exchange fees. You can be in a short position for a week and pay daily fees which only damage your equity, and therefore margin ratio. So why not just sit back, be patient and define some concrete rules for entering and exiting? Avoid risky situations, and let the market bring the profits whenever it decides to. 4 ♦ Chasing Huge Profits Hold your horses, Warren Buffett. Through blood, sweat and tears, we can promise you that you cannot seriously expect to make 100% every month, no matter what magical backtesting or statistics you are calculating your future fortune on. Moreover, you will realise that consistently making 2-5% a month is an excellent career for a trader. Yes, the markets can be good friends for a while, you may stumble into a bull-run and start making double-digit profits from a trade from time to time. Double-digit losses will also follow if you lose your sight in a cloud of euphoria and greed. Many times, you can follow the “profit is profit” principle, and exit at a small win if the risk of loss is increasing. 5 ♠ Being Sentimental Towards Given Assets You may have a fondness for Bitcoin and Tesla, and we understand that because we too have our favourites. Perhaps you’re deeply attached to the vision, community and purpose of certain projects. On the flip side, there may be projects that you completely despise and hope their prices plummet to zero. What you personally like and dislike, should not interfere with your work as a trader. Introducing such strong emotions into your trading will lead you into a loop of irrational decisions. You may find yourself asking, “Why isn’t this price going parabolic with how good the project is?”. This sounds, from personal experience, quite similar to sitting at a Roulette table and asking: “Why does it keep landing on red when I’ve been constantly betting black? It has to change any moment now”. First and foremost, you may be completely wrong, but most importantly – it could go parabolic, but trying to predict the exact time or expecting it to happen immediately and placing your “bet” on that is again, gambling. Don’t get attached to projects when trading. If you are an investor who just wants to hold their shares in an awesome company, or cryptocurrency, that is perfectly fine, hold them as much as you want. The key is to make an important distinction between trading and investing, and to base your strategy on the hand that the market provides you with. 6 ♣ Putting Your Eggs In One Basket We all have heard of diversification, but how you approach it is crucial. A trader should always have their capital spread between at least a few assets. Furthermore, the trading strategy for each asset must be distinct, or in other words – they should not rely on the same entry and exit conditions for different assets. The markets behave differently for each asset, and you cannot be profitable with some magical indicator or strategy with a “one-size-fits-all” style. Divide your trades into different pairs and asset classes, and study each market individually to properly diversify. Manage the equity you put into each trade carefully! Conclusion The takeaway we want you as a reader to have from this article is that trading without consciously controlling your emotions inevitably leads to great loss and most importantly, a lot of stress. We hate stress. Trading and life in general is exponentially harder when you are under stress. Control your risk, sleep easy, and let the market bring you profits. Reaching this level of Zen will not be easy, but it is inevitable. Be happy when you make a profit, no matter how small or big. A lot of small profits and proper money management complete the vision you have of a successful business. Ultimately, trading is just that – work, not gambling or a pastime activity. Treat it as work and always remember to never rely on luck. The advice we’ve included here is written by a few experienced gamblers… Oops, I meant traders 😉. We hope that some of the lessons we’ve had to painstakingly learn through trial and error can now be shared with those who are interested. Of course, none of this constitutes investment advice. It’s merely a friendly heads-up.
Education
by sofex
The Mind of an Ego Trader – 10 ActionsWe always hear of the two most dangerous states of trading. Fear and greed. But I think there is one more state, that really drives a trader to financial collapse. EGO. Ego is thinking you’re always right where you ignore risk and caution. It’s the voice in your head that tells you to make risky choices because you believe you know better. To overcome being an ego trader, we need to go inside the mind of one. Let’s start… Ego traders overtrade One of the most common pitfalls of ego trading is overtrading. This is the act of buying and selling markets way more than you should. They believe that the more they trade, the more profits they will make. Solution: Adopt a well-defined trading strategy and stick to it. You need to know how and where to enter your trades with strict risk management. Remember, quality should always be prioritized over quantity. Ego traders like to revenge Trade Ego traders refuse to be wrong. They’ll take a trade in one direction, bank a loss. And then immediately get in again, but in the opposite direction – to make up for losses. Their goal is not to trade well but to recoup any losses ASAP. This behaviour is often driven by the ego’s inability to accept a loss. And this will drive them crazy until they blow a big portion of their account. Solution: Acceptance is key. Every trader is going to take losses. You need to take the loss (see it as the cost of trading), and come back the next day. Take a step back, analyse the situation objectively, and stick to your trading plan. Ego traders ignore risk management Egotistical traders think like this. “I want to grow rich quickly and refuse to only bank 3% to 4% of my portfolio per trade”. They instead risk 5%, 10% and sometimes go full port. They have this invincibility complex, that the more money they risk the more likely they’ll build their account quickly. But this is reckless and your portfolio won’t last long. This will often lead to disproportionate losses. Solution: I sound like a parrot by now. Always adhere to your risk management rules. Determine your risk tolerance, set risk-reward ratios for your trades, and never risk more than you’re willing to lose on a single trade. You know this! Dismiss Market Analysis Ego traders are emotional. They mainly trust their feelings, their jiminy cricket voices and their instincts over solid and proven market analysis. This will obviously lead to discretionary trading decisions, which will eventually lead them with no strategy, no discipline, no rules, and no portfolio. Solution: Become a trading machine. Think like a robot and always base your decisions on thorough market analysis. This includes both technical analysis (price trends, indicators, etc.) and fundamental analysis (economic, financial, and other qualitative and quantitative factors). Ego traders blame everything Ego traders often blame the market, their broker, their children, the media, or unexpected news for their losses. You need to grow up and take on the mature approach. Every financial decision and action you make, is solely your responsibility. Solution: Take responsibility for your actions. Understand that the market is unpredictable and losses are a part of trading. Don’t trade if you’re feeling distracted, Don’t trade if you’re feeling you’ll blame something or someone. Learn from your mistakes and learn to humble yourself before the market does. Ego trader are trend top and bottom pickers These are the guys that literally try to ‘predict’ bottoms or tops. They go against the current trend, and instead guess that the price will turn from here. They give you every reason why the market will turn. They know privy info that no one else does (even though all info is in the public domain). They know strategies and indicators that make these predictions (even though all indicators are based on past data). They see and feel out of their asses about change in trends. And when they’re wrong (which most times they are), they find every reason, news event and indicator to guess when the market will turn. This usually results in entering at a bad price and subsequently facing a huge loss. Solution: Leave the tops and bottoms. Seriously, ignore the first 10% of the bottom. Leave 10% of the top. Claim the 80% market move when the trend has confirmed and is showing strong momentum. Enjoy going with the trend not against it. Ego traders over leverage It confounds me that traders want more leverage. They show off about 20 times, 50 times up to 500 times. You know what that means right? You can lose 20, 50 or 500 times the money you put in. Leverage is a double-edged sword. You desire the big wins and only think of the big wins. When then you are wrong (and you will be), you end up losing a colossal amount. Solution: Use leverage responsibly. Lower the leverage, the better you can manage your risk and reward management. Ego traders disregard stop losses Stop losses are designed to limit a trader’s loss on a position. However, there are two types of ego traders. The ones that trade naked (without a stop loss) and the trade goes heavily against them where they lose their hat. Then there are the ones that put in their stop loss. But then they move their stop loss FURTHER away where they can risk more. Once this happens, they marry into their trade. And they’ll keep moving the stop loss away again and again and again and then BOOK. Gone. Solution: First rule – Always set a stop loss. Second rule – NEVER move your stop loss where you can risk more. Super important. Ego traders dismiss discipline They have major commitment issues. They choose their days and times. They trade now and then when they feel like it. And this dismisses the discipline of taking every trade, one needs to take to build a consistent portfolio. Solution: See trading as a business. See trading as a job. See your trading strategy as your boss. Work accordingly like your life and livelihood depends on it. Discipline is key in trading. Maintain your discipline and eventually it’ll turn into integration. Then you’re sorted. Ego traders fail to adapt The market is constantly changing. There are always new markets. There are always new platforms. There are always new brokers. There are always new innovations and features. And yet ego traders, stay put. You need to learn to adapt to market changes. You need to constantly update yourself as a trader, your strategy, your watchlist and stay with the times. With discipline, a clear plan, and a bit of humility, traders can better navigate the markets and improve their chances of success. Let’s sum up the Mind of an Ego trader so you know how to overcome it. Ego traders overtrade Ego traders like to revenge Trade Ego traders ignore risk management Dismiss Market Analysis Ego traders blame everything Ego trader are trend top and bottom pickers Ego traders over leverage Ego traders disregard stop losses Ego traders dismiss discipline Ego traders fail to adapt
TVC:SA40Education
by Timonrosso
3 Dangerous States of a Trader“To err is human” It comes from Alexander Pope’s poem, “An Essay on Criticism.” This popular saying reminds us that making mistakes and feeling emotions are a common part of the human experience. In the high-stakes arena of financial trading, most people run their trading through three main emotional states. You might not be able to eradicate them completely but we can learn to keep them in check for superior trading performance. Let’s go through these three powerful states. State #1: Fear in Trading Fear is the emotional state that: Stops traders from actioning trades. Letting losses run (as they refuse to take a loss) Cutting winners too short (as they don’t want to lose their profits) When fear dominates, traders may freeze, act too soon, act too late or not act at all. How to Overcome Fear in Trading A well-structured trading plan is a trader’s best defense against fear. You need to think like the market. You need to trade like the market. You need to remove fear from your actions. That’s why you need to limit your risks per trade, where the loss does not affect you emotionally. You need to be strict with your trading plan, to avoid any discretionary and impulse trading decisions. And it’s important to start thinking with a more mechanical and rational approach rather than fear-driven ones. Practice mindfulness and stress management techniques can also keep your fear under control. State #2: Greed in Trading Greed drives traders to chase profits. This often compels them to take on excessive risk for the chance at bigger returns. They either increase their risk per trade, knowing that the reward will be bigger. Or because they want more, they will hold onto positions for too long. Having greed overtake the mind, will also result in overtrading and using up too much of their portfolios per position. How to Keep Greed at Bay in Trading Understand that trading is a long-term game. Consistency with small gains will build up a portfolio. Be content with 3% – 4% winners. Keep to this and greed will fall away and you’ll have a better chance of longevity when trading. State #3: Ego in Trading Ego is one state I never see anyone talk about. All you hear is fear and greed and greed and fear. But EGO. Ego is probably the most stubborn enemy. “Ego gets you inches but it doesn’t get you impact.” – Cameron Sinclair It convinces traders that they’re right, even when the market says otherwise. An inflated ego can lead to overconfidence, over trading, revenge trading and it can cause traders to disregard their strategy, risk and they’ll end up making irrational and dangerous trading decisions. How to Check Ego in Trading Even the most successful traders suffer losses. So you need to humble yourself and adopt amore mindful approach to realistic trading. Each small loss is a contribution and a trading cost to one step to success. You’ll also learn more from your losses than your gains. Which will give you an opportunity to learn and improve. So go back to your trading journal and review, monitor and analyse the true essence of what it takes to build your portfolio. This will help keep your ego in check. Conclusion Fear, greed, and ego are integral parts of the human experience. But there is NO need and use for it to succeed as a trader. When you learn to recognise these states and, you’ll be able to manage them better. And this will drastically improve your trading performance. Remember, successful trading is less about conquering the market and more about mastering your emotions.
JSE:J200Education
by Timonrosso
Market Psychology and Your Trading Decisions✨ Unlocking the secrets of market psychology is vital for successful trading. Here's why: 🔹 Emotions at Play: Fear, greed, and herd mentality significantly influence your trading choices. 🔹 Rational Thinking: Being aware of market psychology helps you maintain a calm and logical approach to decision-making. 🔹 Trend Spotting: Recognizing market psychology enables you to identify potential market trends and reversals. 🔹 Tackling Biases: Self-assessment must consider three biases: 1️⃣ Confirmation Bias: Avoid favoring information that confirms pre-existing beliefs. 2️⃣ Overconfidence Bias (Dunning-Kruger Effect): Beware of overestimating your abilities as a novice trader. 3️⃣ Loss Aversion Bias: Recognize the inclination to avoid losses more than seeking gains. 🔹 Prospect Theory: Understand how prospect theory shapes decision-making, where individuals take risks to evade losses rather than pursue equivalent gains. 🔹 Stay Informed: Stay updated with market news to avoid impulsive reactions to short-term fluctuations. 🔹 Empower Your Trades: An understanding of market psychology empowers you to make informed and rational trading decisions. ✨ Harness the power of market psychology for long-term trading success! 📈💪
TVC:DXYEducation
by Moon_SmartMoney
Unleashing the Power of Sentiment Indicators in TradingChapter 1: Introduction to Sentiment Indicators In the world of trading and investment, understanding market sentiment is essential for making informed decisions. Market sentiment refers to the overall attitude, emotions, and opinions of market participants towards a particular financial instrument, sector, or the market as a whole. It is a key factor that influences price movements and can provide valuable insights for traders. The role of emotions in trading is also crucial. Emotions such as fear, greed, optimism, and pessimism can significantly impact trading decisions and market behavior. Understanding and analyzing these emotions can help traders gauge market sentiment and identify potential trading opportunities. Sentiment analysis is the approach used to measure and quantify market sentiment. It involves extracting subjective information from various sources such as social media, news articles, and options markets to determine the prevailing sentiment. The goal is to understand and interpret the collective emotions of market participants. Sentiment indicators play a vital role in sentiment analysis. These indicators are tools and metrics that provide quantifiable measures of market sentiment. By incorporating sentiment indicators into their analysis, traders can gain a deeper understanding of market psychology and make more informed trading decisions. In the following chapters, we will explore different types of sentiment indicators and their applications in trading. We will delve into social media sentiment analysis, news sentiment analysis, options market sentiment, and more. Through real-life case studies and examples, we will demonstrate how traders can effectively leverage sentiment indicators to enhance their trading strategies and navigate the markets with greater confidence. So let's dive into the exciting world of sentiment indicators and discover how they can empower traders to make smarter trading decisions in various market conditions. Chapter 2: Social Media Sentiment Analysis Social media has become a powerful platform for expressing opinions and sharing information, making it an invaluable source for understanding market sentiment. Platforms such as Twitter, Facebook, and Reddit provide real-time insights into the thoughts and emotions of a wide range of market participants. Traders can harness the power of social media by analyzing sentiment expressed in posts, comments, and discussions related to financial instruments or markets. This can be done through the use of sentiment analysis tools and platforms. These tools employ natural language processing and machine learning algorithms to analyze and quantify sentiment. When analyzing social media sentiment, it is crucial to identify the influential platforms for each specific market. Different financial instruments and markets have unique social media platforms where participants share their views and opinions. For example, Twitter might be the primary platform for discussions related to cryptocurrencies, while LinkedIn could be more relevant for the stock market. By focusing on the platforms that hold more influence, traders can gain more accurate insights into market sentiment. Real-time sentiment analysis of social media involves monitoring conversations, identifying relevant keywords, and applying sentiment analysis algorithms. This process enables traders to gauge the sentiment as positive, negative, or neutral. By tracking sentiment shifts in real-time, traders can make timely trading decisions and take advantage of emerging trends or sentiment-driven price movements. To illustrate the effectiveness of social media sentiment analysis, let's explore some case studies. In one example, a trader monitors sentiment on Twitter for a particular cryptocurrency. By analyzing the sentiment expressed in tweets, the trader identifies a surge in positive sentiment accompanied by an increase in trading volume. This information serves as a signal to enter a long position, anticipating a price increase driven by bullish sentiment. The trader successfully profits from the sentiment-driven rally. In another case, a trader uses sentiment analysis of social media discussions to identify a sudden increase in negative sentiment towards a stock. Recognizing this shift in sentiment, the trader decides to exit their position or tighten their stop-loss level to protect their profits, anticipating a potential price decline. This proactive risk management based on sentiment analysis helps the trader avoid potential losses. By incorporating social media sentiment analysis into their trading strategies, traders can gain a deeper understanding of market sentiment and improve their decision-making process. However, it is important to remember that social media sentiment analysis should be used as one piece of the puzzle alongside other forms of analysis to build a comprehensive trading strategy. Chapter 3: News Sentiment Analysis News plays a significant role in shaping market sentiment. Positive news such as strong earnings reports, positive economic indicators, or favorable regulatory developments can create a bullish sentiment, leading to increased buying interest. Conversely, negative news such as poor economic data, geopolitical tensions, or negative corporate announcements can generate a bearish sentiment, resulting in selling pressure. News sentiment analysis involves analyzing the sentiment expressed in news articles, press releases, and other sources of financial news. The goal is to extract the overall sentiment conveyed by the news and understand its potential impact on market sentiment and price movements. There are various tools and techniques available for news sentiment analysis. These tools employ natural language processing and machine learning algorithms to analyze the sentiment of individual news pieces. They assign sentiment scores, such as positive, negative, or neutral, to quantify the sentiment expressed in the news. Financial news headlines are particularly important as they often convey the key sentiment of an article. Traders can focus on analyzing sentiment in news headlines to quickly gauge the overall sentiment without delving into the complete article. This allows for efficient scanning of multiple news sources and provides traders with timely insights into market sentiment. Incorporating news sentiment analysis into trading strategies can be done in several ways. Traders can use sentiment-triggered trade entries, where they initiate trades based on significant shifts in news sentiment. For example, a trader might enter a long position in response to overwhelmingly positive news sentiment regarding a particular stock, anticipating a price increase. Alternatively, news sentiment can serve as a confirming factor for technical analysis. If technical indicators suggest a bullish trend, positive news sentiment can provide additional confidence in the trade. Let's examine a case study to further illustrate the application of news sentiment analysis. Suppose a trader is analyzing the sentiment surrounding a company's earnings announcement. Through news sentiment analysis, the trader identifies a strong positive sentiment across various financial news sources. This positive sentiment indicates high market expectations for the company's earnings results. Based on this analysis, the trader decides to enter a long position before the earnings release, anticipating a favorable outcome. When the company exceeds expectations and reports stellar earnings, the positive sentiment is reinforced, resulting in a significant price increase. The trader profits from the sentiment-driven rally by making a well-timed trade based on news sentiment analysis. Chapter 4: Options Market Sentiment Options trading provides valuable insights into market sentiment as it reflects investors' expectations and sentiment towards the underlying asset. By analyzing options market sentiment, traders can gain a deeper understanding of market sentiment and potential price movements. One commonly used sentiment indicator in options trading is the put/call ratio. The put/call ratio compares the volume of put options, which give traders the right to sell an asset, to the volume of call options, which give traders the right to buy an asset. A high put/call ratio suggests bearish sentiment, indicating that more traders are betting on a price decline. Conversely, a low put/call ratio indicates bullish sentiment, with more traders anticipating a price increase. Another important indicator is implied volatility. Implied volatility is derived from options prices and reflects the market's expectation of future price volatility. Higher implied volatility suggests increased market uncertainty and potentially heightened bearish sentiment, while lower implied volatility indicates lower expected volatility and potential bullish sentiment. Traders can also analyze options-related metrics such as open interest, the skew index, and the volatility skew to gauge market sentiment. Open interest represents the total number of outstanding options contracts, providing insights into trader positioning and sentiment. The skew index measures the perceived risk of extreme price moves, while the volatility skew indicates the difference in implied volatility between options with different strike prices. To illustrate the application of options market sentiment, let's consider a case study. Suppose a trader observes a high put/call ratio in a particular stock, indicating bearish sentiment. This signals a potential price decline. The trader combines this information with other technical indicators pointing towards a bearish trend and decides to enter a short position. As the market sentiment unfolds, the stock experiences a significant price drop, validating the initial bearish sentiment and resulting in a profitable trade for the trader. Chapter 5: Fear and Greed Index The Fear and Greed Index is a sentiment indicator that measures market sentiment on a scale of extreme fear to extreme greed. It combines various factors, such as stock price momentum, market volatility, junk bond demand, and safe-haven flows, to gauge overall market sentiment. The components and calculation of the Fear and Greed Index can vary, but the index generally assigns a numerical value or category to represent the prevailing sentiment. Extreme fear levels suggest a highly pessimistic sentiment, often associated with market downturns or significant price declines. On the other hand, extreme greed levels indicate excessive optimism and potentially overbought conditions, signaling a potential market correction. Traders can incorporate the Fear and Greed Index into their trading strategies in several ways. It can serve as a confirming factor for technical analysis, where extreme fear or greed levels align with other indicators pointing towards a potential trend reversal. Additionally, contrarian traders may use extreme sentiment levels as a signal to consider taking opposite positions, capitalizing on potential market reversals. Let's explore a case study to demonstrate the practical application of the Fear and Greed Index. Suppose the Fear and Greed Index reaches an extreme greed level, indicating excessive optimism and potentially overbought conditions in the market. A trader who closely monitors the index recognizes this as a warning sign and starts analyzing other technical indicators. They observe overextended price levels, declining trading volume, and bearish divergence on oscillators. Taking all these factors into consideration, the trader decides to exit their long positions or initiate short positions, anticipating a potential market correction. As the market sentiment shifts from extreme greed to fear, the market experiences a significant decline, validating the trader's decision and resulting in profitable trades. Chapter 6: Conclusion and Future Outlook In conclusion, sentiment indicators provide valuable insights into market psychology and can significantly enhance trading decisions. By understanding market sentiment through sentiment analysis tools, traders can gain an edge in their strategies. Social media sentiment analysis allows traders to tap into the real-time opinions and emotions of market participants, while news sentiment analysis helps traders assess the impact of news events on market sentiment. Options market sentiment and sentiment indicators such as the Fear and Greed Index provide additional perspectives on investor expectations and sentiment towards the market. As technology and data analysis techniques continue to advance, sentiment analysis is expected to evolve further. Integration of artificial intelligence and machine learning algorithms can enhance sentiment predictions and improve the accuracy of sentiment analysis tools. This will empower traders with even more robust insights into market sentiment. To harness the power of sentiment indicators effectively, it is essential to integrate them with other forms of analysis, such as technical analysis and fundamental analysis. By combining multiple perspectives, traders can make well-informed trading decisions and increase their chances of success. In the ever-changing landscape of financial markets, sentiment indicators will continue to play a crucial role in understanding market dynamics. By staying abreast of emerging trends and advancements in sentiment analysis, traders can adapt their strategies and stay ahead of the curve. Ultimately, by leveraging sentiment indicators, traders can enhance their trading success and capitalize on market opportunities.
AMEX:SPYEducation
by Julien_Eche
Trading Psychology: 4 Dangerous Emotions Traders Must AvoidWhen I was a naive, newbie trader, I didn’t pay much attention to my trading psychology. I was more focused on the technical chart patterns and trade setups. However, I soon found out the hard way that… Ignoring the psychology of trading was destroying my trading results. That’s when I began making a serious effort to master my personal trading psychology. I started reading trading psychology books, and even worked with a personal trading coach. I was definitely on the right path to mastering trading psychology, but wished I would have started learning sooner. That’s why NOW is the perfect time to start getting your trading psychology edge. But why is it important to understand stock market psychology? Understanding stock market psychology paves the way for your long-term trading success. That’s why this exclusive new mini-lesson of top trading psychology tips is just for you. How do you develop trading psychology? Some trading sites advise new stock and crypto traders to gain experience by paper trading with a simulated account. This can be helpful to learn the basics of trading, but it’s a much different ball game when real money is on the line. Your true emotions in trading will only be revealed when risking your own money with actual trades. Therefore, the best way to develop your trading psychology is simply by working your way through hundreds of live trades with real capital. Keep a basic journal and note when you feel the dangerous emotions below start creeping in. This is the only way to truly identify your personal strengths and weaknesses in trading psychology. 4 Most Dangerous Emotions to Avoid: Fear, Greed, Hope, and Regret Investing decisions in any market in the world are driven by 4 powerful emotions of Fear, Greed, Hope, and Regret. Left uncontrolled, these emotions can have a seriously negative impact on your trading account—but only if you let them. Your personal ability to master these key emotions directly determines your long-term trading success. So here’s a quick rundown of how fear, greed, hope, and regret can harm your trading results. Most importantly, I have also included actionable ways to avoid these emotions in your trading. FEAR – The most powerful human emotion that affects your trading Fear is a distressing emotion caused by a feeling of impending danger. This results in a survival response, regardless of whether the threat is real or imagined. Traders consistently report fear as the emotion they struggle with the most. Fear has even caused people to jump off buildings during market panics. FEAR is the reason markets typically fall much faster than they rise. It took the Dow Jones Industrial Average 24 years (1983 until 2007) to rally from 1,000 to 14,200…BUT it only took 2 years (2007-2009) to lose HALF of that multi-decade gain. Why? Uncontrolled fear rapidly leads to panic—which leads to poor decision making in the markets. When traders become driven by panic, they often sell their positions at any price. That’s why stocks frequently cliff dive when group fear starts kicking in. Fear can also rear its ugly head after you experience a string of losing trades. After suffering many losses, fear of “yet another loss” can make it mentally challenging to enter new swing trade setups. When paralyzed by fear, you miss out on profitable trading opportunities. If it’s a quality trade setup, then don’t let fear prevent you from buying (be careful not to confuse this with revenge trading). Remember that each trade you enter is completely independent of the previous trade. Therefore, losing money on a prior trade does not necessarily mean you will lose on the next trade. Fear is not always bad, as it can help keep losses small. For example, fear of a bigger loss can get you out of a bad trade you should no longer be in. If you immediately sell your stock or crypto when it hits your preset stop price, then the fear of a bigger loss protects you from major losses. When there is fear, steer clear! If the market is in a state of panic, don’t fight the downtrend. If you’re in doubt, get out! Don’t try to rationalize or come up with excuses to stay in losing positions beyond their stop prices. HINT: Ignore the news and internet forums to prevent lame rationalizations for staying in losing trades. When there is too much fear in the markets, our flagship swing trade alerts service simply shifts to cash until a new buy signal is received. This prevents fighting strong downtrends in unfavorable conditions. GREED – Too much greed decreases your trading profits Greed is an excessive desire for money and wealth, but is a natural human emotion. A healthy amount of greed can help drive your trading profits, but too much greed will have the opposite effect. How to know when it’s too much greed Greed is when you have already made a large profit on a trade, BUT are still obsessed with how much more you could have made if you stayed in the trade longer. The mistake with this reasoning is that all gains are not real until the position is closed. Until then, a winning trade is only a profit on paper. Greed can also cause traders to make bad trades by ignoring solid risk management rules, which signals a lack of discipline in your trading or investing. To keep greed at bay on a winning trade, sell partial share size to lock in profits, then trail a stop higher on the rest. Proactive trade management like this is why our exclusive Wagner Daily stock picks have been consistently profitable over the past 20 years. HOPE – A fake friend who will take your money (but only if you let it) Hope, a feeling of anticipation and desire for a certain event to happen, may be the most dangerous emotion for traders. If you are an active trader or investor, the feeling of “hope” in your day to day trading activities must be avoided at all costs. Why is hope so dangerous for traders? Hope may prevent you from immediately selling a losing trade that hits its stop price—which is the top rule with most trading strategies. When you blow a stop, you will usually wind up with a much bigger loss than you planned to risk. You may get lucky with a second chance to exit (especially in a forgiving bull market). However, this is definitely not a situation you want to be in. A weak stock typically continues much lower before bouncing, which is why you must always honor your stops. Otherwise, that’s when hope can really sneak up on you! Hope will convince you to just “hang in there a little longer” because: “Big news is coming soon” “This stock will surely rally after their next earnings report” (Insert your favorite bullshit excuse here) Meanwhile, while you’re busy hoping, the price plummets and has a catastrophic effect on your entire trading account. Rest assured, the market will eventually punish you by taking your money when you slip into “hope mode.” But the good news is that YOU alone can easily prevent this scenario from happening. Simply always set protective stops to pre-define your maximum risk per trade. Be rigidly disciplined to follow your trading plan, and hope will never become an issue in your trading. Plan your trades, and trade your plan. REGRET – Remember the next opportunity is always just around the corner Regret is defined as a feeling of sadness or disappointment over something that has happened—especially when it involves a loss or a missed opportunity. It is only natural for a stock trader to regret entering a losing trade or missing out on a winning trade. But to master your trading psychology, do not hyper-focus on losing trades or missed opportunities. If you lose money on a trade, then simply evaluate what went wrong, learn from it, and move on. Don’t waste time regretting your original decision to enter the trade. What’s done is done. Conversely, you may feel regret when you miss an opportunity. This is human nature. However, you must train your mind to simply move on to the next trading opportunity—which is always just around the corner. When you allow this type of regret to control you, it becomes too easy to “chase trades” with risky entry prices. If you chase, your risk/reward ratio of the setup no longer meets the parameters of healthy trade management. Let’s say you plan to buy $DUDE stock at a $60 buy trigger price, with a swing trade target around $70. If you buy it, you plan your initial stop at $55. This gives you a 1:2 risk/reward ratio (risking $5 to gain $10). $DUDE stock rallies, but you miss your original $60 buy and instead chase the price to an entry at $65. If you don’t significantly raise your initial stop, you now have a negative risk-reward (risking $10 to gain $5). In this case, your regret of missing the $60 entry caused you to chase it to $65 (next time, just wait for a pullback). Avoid feelings of regret to ensure the math of trading is always in your favor. We always target a bare minimum risk/reward ratio of 1:2 for swing trades in our stock and crypto swing trade alerts services. Successful traders keep their minds disciplined to avoid remorseful thinking. original source
NASDAQ:QQQEducation
by rp-mtg
THE FEAR & GREED INDEX: THE LOWEST LEVEL, SO FAR.Welcome traders to this Fear & Greed index. The F&G Index has gone to the lowest level of 6 to date. This is the lowest in the history of cryptocurrency and this could get recorded only if the market bounces back from the current level. In my F&G updates, I have mentioned that we can possibly see the F&G reaching close to 1 as well but then what? Could it go zero or -1? There's no way that could happen. The F&G Index won't stay at this level for long. Soon we will see the indicator moving from 4,5,6 to 12,20,30. This is the time of accumulation, my friend. This is not the time to give up or sell your bags. I am accumulating it one at a time. No rush, no harry. Just slow and steady. What is your strategy? Are you accumulating too? Like and follow if you agree with me. Thank you.
INDEX:BTCUSDEducation
by Dexter_The_Trader
11
How to win over greed?🎃1. Greed is the problem Many beginners and even experienced traders face greed. It's a feeling that makes you believe in your superiority over the market: • Opening a lot of trades, breaking risk management • Continuing to trade after incurring a loss • Refusing to take profits, hoping to earn more • Averaging losing trades, because everything is about to change. • Believing in the reliability of your pattern, although no pattern or indicator always works out 100%. 2. Why does greed take over? We all have our own desires and goals. Society teaches us that we shouldn't deny ourselves comfort. This leads the vast majority to take out loans for new clothes, iPhones, Cars.. This is how people get used to greed's superiority and put it before discipline, getting accustomed to being able to live beyond their means. What do you think happens to such people when they come into trading? God forbid, such a person immediately learns about futures, then he will lose everything in a month at most. This is exactly the 95% who lose money in the market. They suddenly see an opportunity to make a million out of $10,000 in a month, and, inspired by the stories of dogecoin millionaires from YouTube and Reddit, start to long bitcoin with x125 leverage. There is another type. They do not rush to make money, they act more cautiously. They set themselves up right away that "trading is a long game and there is no hurry". They develop steadily and study pattern after pattern. However, their game pays off very slowly, and under the influence of their expertise they allow themselves more and more "experiments". They are like King Theoden from Lord of the Rings, who was slowly losing his mind under the watchful eye of Wormtongue. 3. How do you get around greed and start using it to your advantage? Change your perspective. Instead of being greedy for money, become greedy for your professional growth . Ironically, if you stop focusing on money, they will come. Create a journal and start analyzing your trades: • What were your reasons for entering? • Did you need to open that trade or was it suboptimal? • Did you act under the influence of emotions, and if so, which one and why? Develop, grow, and reward yourself when you get better, even if your trading results are unchanged. Your brain needs to get used to the fact that the most important thing now is discipline and small improvements. Step by step, you will become a profitable trader and, when you do, withdraw your honestly earned profits into fiat to reward yourself for your fortitude and persistence. You will succeed, because unlike all casino players, you will have the backbone and endurance! Good luck on your journey! If you have any questions, feel free to ask them in the comments, I always check and answer them. Leave a like so you can enjoy the trader psychology posts in the future as well, and thanks for reading to the end. You are the best!
Education
by Artem_Dishel
8
Trading strategies, Part 1: First stepsWelcome to a series of videos called Trading Strategies. In the next couple of weeks, we'll talk about different strategies one can use to maximize gains: Market psychology, trading tools, trading styles, technical analysis. Today, the first steps: 1- Defining who you are: Are you an investor or a trader 2- Educating yourself: Knowledge is the best tool someone can have on the market 3- You can't win all the time 4- Don't be greedy Stay tuned for more content
BITSTAMP:BTCUSDEducation
by KairoiCapital
1
Manage your emotionsTrading requires focus. It is crucial for traders to know exactly what to do to control their emotions while trading. It is also important to know when to accept a loss and move on. Here are 10 tips from the pros to manage your emotions while trading: 1) Manage your stops carefully. A cautious approach to stops and limits will keep you from making rash decisions. It hurts to get a trade stopped out, but over time you will save money on losses. Your trading journal can give you useful comparisons on levels for stops. 2) Don’t marry your positions. It’s easy for a trader to get stubborn, and to hold on to a trade just because he ‘hopes’ it will turn around. Close down a bad trade as soon as possible, take your loss and move on. Your trading journal will suggest the next move. 3) Follow each trade with a break. Trading goes on at a rapid pace, so don’t get caught up in the action. Take a moment to think about something else, and then come back and deliberate. Now look at your trading journal to get the next idea. 4) Set a fixed point at which you stop. After three, four, five or whatever number you choose, stop for a good long break. It’s when one trade follows another that most mistakes happen. Consult your trading journal and review your strategy. 5) Don’t keep track of profit and loss. Doing the math on your earnings will only get your emotions working. Concentrate on your trading strategy, and review your trading journal to develop it. Then, at the end of the trading day, you can check out how well or poorly you did. 6) Keep your mind on the plan. Don’t let the results of a few trades change your overall strategy and approach. Stick to what you have learned and what you have planned – use your trading journal to develop your next moves. 7) Don’t confuse prudence with fear. You want to trade prudently, using logic and reason. This may make you hold off on a trade. But make sure that prudence, and not fear, is behind your decision. Fear can wreck your trading by keeping you from making a trade. Use your trading journal to see if the trade makes sense, follows previous wins, or if the trade just doesn’t make sense. 8) Watch out for greed. Greed can make you stay in a trade when you had planned to exit, hoping to milk it for a little more profit. Such trades risk turning out badly, just when you thought you were winning. Use your trading journal to judge the best exit points based on past behavior. 9) Don’t act on anger. When you’re angry, hold out, wait until reason takes hold. There is no worse trade than a “revenge” trade, in which a trader follows up a loss by jumping right back in to recoup. Consult your trading journal to get back on track. 10) Don’t give up. There comes a point in every trader’s life when it just doesn’t seem worth it anymore. Don’t let yourself be intimidated. Trading is tough, but you can win.
Education
by MoonBets
5
Most common mistakes in tradingHello my friends today i want to talk with you about most common mistakes in trading from my experience (any market but specially in crypto) And after reading this i hope you will avoid them 1- Not Patient Enough : I think this is one of top major reasons for failure in cryptomarket Most newbies in this Field are thinking they will be rich in few days thats completely wrong ...Any old trader here will tell you how the patience will paid off 2- More Than You Can Afford To Lose : only risk what you can afford to lose ... more than that will lead to alot of mistakes and you may close your position after any small drop before reaching stoploss point and thats wrong my friends 3- Not Using Stoploss : Stoploss is important but i recommend manual stoploss by candles closing not automatic one to avoid manipulation in market.. if you dont know difference between manual and automatic read my previous idea about it 4- Over Trading : Alot of trades every day wont make more money ...instead, it will make you more stressful and staring at charts all day resulting in more mistakes 👉Fewer in numbers and higher in quality trades per week or even month are enough sometimes best thing you can do is not trading at all when market is uncertain 5- Emotional Trading : Both fear and greed play big role in the market movement When you see most of people are greedy you should start taking profits partially ..and also try to avoid selling during panic sells 6- Revenge Trading : Like using all wallet to buy one coin (all in) or doing high leverage postion to recover losses fast usually end in liqudation or big lose and leaving market completely This market need you to be flexible 7- Ignoring Your First Plan alot of very good plans and managements from start but you continusoly change it by listening to other random people opinions trust in your self and trust in chart no problem from taking advices from more experience people but you should trust in yourself first by have your own view and own plan How many mistakes you find yourself doing it ...choose the number from above and tell us in comments
Education
by Babenski
43
The adventures of leveraged naked ootm option sellersAh the famous "free money" option sellers. Ah the famous strangle strategy. Option sellers. Ok. Naked option sellers. Sooo...? Way out of the money naked option sellers. Let me think... Way out of the money strangle naked option sellers. Getting good. Ultra Leveraged Way Out Of The Money Strangle Naked Option Sellers. Oh boy. Ultra Leveraged Way Out Of The Money Strangle Naked Option Sellers That Never Cut Their Losses. Not fair for other Darwin award contestants!. They have to be doing it on purpose. A strangle is an absolutely garbage strategy where the writer sells (slightly) out of the money options on both sides. The maximum profit happens when the price stays between both strike rates. Not going to make a full explanation and a drawing, but what is important is it involves option sellers that take small premiums win very often but are at high to unlimited risk. The premium basically means that even if the price goes against you a bit you are still in the green. Out of the money means you have even more breathing space before the price gets to a losing area, and then additionally you have the opposite side premium as additional "breathing room", which in all means the price has to move very much for you to even start being worried. But when it goes that far... careful. Depending on how out of the money the option is the premium can get pretty low... So the option seller won't make alot of money. There is no free lunch. A summary of those strategy is "Picking up pennies in front of freight trains." Ok here is a drawing xd A few people use this, and I know it is taught by Tom Sosnoff that runs a brokerage. You might recognize him in some old documentary & interviews about the 1987 (he was a market maker obligated to buy people bags and "add to loser" and they all were running out of liquidity & had to beg banks for more money so the whole system would not collapse). He is the creator of thinkorswim that he sold to TD Ameritrade for a big bag of money. He published a video recently where he bashed the robinhood effect where down synd- er I mean young credulous investors (and legends like Portnoy) are getting enabled to gamble on risky & complex products they do not understand. Oh wait no he praised it all, said it was wonderful and a new paradigm. Sad. "Hurray optimism" (until the suicide). Not sure what my opinion of him is right now. On the long run those strangle work, and ... well I can't say any idiot can do those clearly with all the clowns blowing up ... but it does not require any prediction ability (you are better off if you can predict low volatility thought), it is maybe complex to understand for novices at first but rather "easy". Someone running such a strategy will often win, and get consistant profits, but the profits are just... small. And funds or individuals using this strategy have to be prepared for big moves that sometimes happen and have a plan to hedge at some point. Tom Sosnoff tells people to "trade small trade often" (another broker telling people to trade often gee didn't expect that). Since this strategy makes little profit, fools have a tendancy to use leverage, sometimes alot. Warren Buffet once said, or more than once, way more, that leverage was the best way to wipe out your wealth. Especially when mixed with ignorance. He uses leverage himself, but not like this, not like these guys... The only way I see leverage maybe making sense with those strategies is say you make 1% a year, so you'd put 90% of your money in a mix of equity indices & risk free with low correlation, then use 10 leverage on the remaining 10% that is used to write options, keep risk managed, so then you make 10% on the 10% and if something goes real wrong you have deep pockets, 9 times the amount... Using a bit or even 2-3 times more capital and more leverage too would not even result in getting wiped out for those that did. They REALLY asked for it. There are plenty of naked option sellers that got wiped out, included hyped or famous ones. Naked selling means you do not own the underlying (so if you never buy until the client exercises his right you will have to first buy the asset at whatever price, or have to buy it from him if he is short potentially at a much higher price than the market price). James Cordier from OptionSellers dot com, Victor Niederhoffer, Karen Supertrader, LJM Preservation And Growth Fund (HAHAHAHA they have a great sense of humor). James Cordier used way out of the money options, so it would look something like that: Wow! We found the holy grail! You cannot lose! He really got zero sympathy, and even his clients did not get much. They either knew it was risky or did not bother how to even put this they did not even bother looking at was option selling was somehow? James Cordier was making tiny profits with huge risk, had very high winrates, and because he made little profits he used extreme leverage to get any significant amount out. He is the epitome of the concept "Picking pennies in front of a freight train". They should use his picture in encyclopedias. Those leverages aren't even poor risk management at that point we reached another stage. Seriously this guy is an absolute psychopath. Victor Niederhoffer used to be a rather famous fund guy, he worked with Soros, he was rather popular I think he wrote in big journals, probably was on tv regularly. He was "one of the best" making 30% a year for 20 years, famous people held him in high regard, he was sort of a mentor to guys that are famous today. But he missed a few braincells. He sold a big amount of naked puts in 1997 then the market crashed. Rekt. Another "myfxbook" loser. Maybe he was just bad all along and got lucky for 20 long years. Outlier. He probably whine that it was just "20 sigma bad luck". He blew up again 10 years later 😂. Rekt by the trash securities crisis of 2007. Oh ye another "free money one". If you saw the movie "the big short" you might remember scenes where bankers were laughing and partying at the "idiots that bought options against CDO/MBS". He was not a banker himself so Bush did not use taxpayer money to bail him out. He was not unlucky actually, he was very lucky to have lasted 20 years the previous time. Dumb people often have Dunning Kruger... Karen Supertrader was a random old lady that got into the Sosnoff noob strategy. It is very hard to lose money while keeping it small with that one, so idk I guess this is why he pitches it to complete noobs that would all become day traders and lose their money quickly. Hey they'd just lose their money otherwise, at least here they are making a little. It is true, can't even blame him he is maybe saving noobs. Should just let natural selection do its job just like getting rich slow is actually not slower, helping people is not actually helping. She was an outlier in a normal distribution, mistook that for greatness, and started a fund managing to get idiots to invest hundreds of million. 150 I think. She ended up losing if I recall a good 50 million, hide the losses as unrealized (which she rolled over each month and used new positions to offset), while still collecting fees. I remember seing her interview on how great she was and thinking "ye give it a little while" and then doing some research, and oh ye blew up haha. Didn't see that coming. I don't get people brains. If people use certain strategies, it is mathematically impossible, literally impossible, they can get certain returns without taking huge risk or committing fraud. Why is it so hard for the creatures on this planet (especially regulators) to comprehend? It is physically impossible. Proven. This is not economy or climate science where randos come up with their ooga booga opinions and apocalyptic calls, mathematical PROOF means it is true period. Really blows my mind. How are all those mouth breathers even alive? If a strategy no matter what is contained in Upper Bound Lower Bound and we are outside of the bounds it's not because of divine intervention or a parallel universe. I don't even know how they think. Lmao I crack up when I try to imagine their thought process. It's like the market moves 10% in a month, and someone tells you they simply bought & held, made 60%, and used no leverage. And some people are stupid enough to think this is possible??????????????????????????????????????? Wow. LJM Preservation And Growth is just the funniest. "Preservation" in the name, then goes to the option selling casino with infinite leverage. People trusted it blindly because it has preservation in the name? XD Reminds me of some groups in the USA self proclaimed "good guys". Idiots that fall for this get the karma they deserve. You can find stories and read about it on the internet it is all over the place. The best bits is how they always find excuses. The fund came up with "there is no way we could have predicted the 911 attacks". The stupidity of this excuse is really beyond. I don't even know where to start. Well I don't think I need to explain. They clearly were in the wrong business entirely. "Oh no there are risks in the business" 😂 One of optionsellers client shared a google doc of his 1 million (in total) portfolio, here it is, it goes from left to right day by day so you can see how the positions evolve and how James Cordier holds onto his losers forever, until death pulls them apart. docs.google.com You can find the second to last idea James Cordier published on seeking alpha here: seekingalpha.com He got all excited at the "free money" (greed & euphoria) and then sh** his pants (fear), held the bags, blew up. The he was less excited (pain regret sorrow etc). Emotions -> Emotions -> Emotions. Mistakes -> Mistakes -> Mistakes. Like a baws. And the guy had 20 years experience or so. His last idea was a short on coffee and he was very right. Should have just went short for real with leverage since he was gambling anyway rather than sell for "only" 1.8 million. The website has his ideas since 2009. You know these people I think they just hate losing. He probably was right often enough but I am not going to backtest his ideas got better things to do (got a new zombie game to try haven't been able to play games in weeks because idk they bore me but at the same time I really need a distraction I must be alone having to force myself to play games rather than the other way around). It is not the case for all of them of course, but I am sure alot would make money without having to use 50 leverage if they just applied their analysis and accepted to take the risks, rather than look for some really stupid trick to always win. As a speculator you get rewarded for absorbing risk/volatility. Sometimes down sometimes up, but on average more up than down. How can some people be in the business, and not as market makers or arbitragers or brokers, for 20 or 30 years and still look for "sure thing" strategies and be afraid of taking a loser? Who cares if the portfolio moves a bit in 10 or 20 years the end result is what will matter. It is clearly not for every one. They should know better and be prepared for the "big events", but they go pavlov brainwash and emotional and feel good about it, as long as it has not happened they think it won't (and even once it does some don't even learn and think they really fell under the wrath of god and did nothing wrong as demonstrated by Victor Niederhoffer, seriously how dumb is this guy? I don't have a quarck of respect for him.) If you are able to survive those big events, accept small drawdowns and they do not cause you to make mistakes, you are already ahead of many. Another obstacle to be making money in this game. When you "have it" it really seems like a no brainer, but yes there really are alot of people unable to climb that obstacle. Aren't 90% of casual investors bagholders? With "strong hands". So afraid to take a loss. Strong hands ye right, weak chins. The receding chins are using computers now so they don't piss themselves, but I don't think the computers will be able to do everything, just the small day trading. If we get to the point computers can go THAT far to predict the future weeks away (not just M5 stat arb etc) we won't even need markets anymore anyway, and we'll be too busy visiting other galaxies xd Imagine science without all the dogmas and politics. Imagine politics without all the politics. And so on. I ain't worried. My tip to profitable speculators: learn to invest, find a passive income stream, you never know if you'll still be making money in 10 years, but don't be too worried all opportunities just disappear (unless communism). Yes you never know if it is a pullback or the end, it is easy to look at it in hindsight compared to being in it and think "oh it just goes up".
NYMEX:NG1!Education
by MrRenev
6
Hope. 🙏🏻 Fear. 😱 Greed. 🤑 Welcome, guys! 😊Today I wanna talk with you about our feelings and emotions💋💋💋 💥 Fear of falling prices provokes a sell , and the opportunity to lose chance to make monney leads to an unreasonable buy .💥              ⚡Such pernicious emotion like greed is a manifestation of the trader’s arrogance and his thirst for a good income as soon as possible, which also provokes the unfoundedness of transactions.🤷🏻‍♀️         Many psychologists and scientists do a lot of research in the study of human emotions and feelings, the results of which show the ability to control their emotions. 💪🏻 In trading, managing emotions is a very necessary. 💪🏻 Let's consider three seemingly simple emotions on which a trader’s work in the market depends in more detail: 📌Fear 📌Hope 📌Greed 😱 The role of fear in trading 😱         In fact, fear plays a significant role in the market. Fear often deprives the trader of the opportunity to earn money, but also saving him from making fatal decisions. The emotion of fear often serves as a kind of "brake" for the trader.        A frightened trader is obsessed with the adverse aspects of trading. Fear of losing money generates a lot of other negative emotions in your head. 🤑 Trader's greed would destroy. 🤑 Greed is a disastrous and dangerous feeling, especially for a trader. The prevalence of greed rarely can help to achieve the desired result. It depriving people of the ability to think soberly and objectively. Often, having felt success, a trader wants to earn more and more by making the following mistakes: ❗ Untimely exit from the transaction ❗ Hold position more then you need ❗ Overstatement of risks 🙏🏻 Hope is the last thing to die 🙏🏻 Of all three emotions, most market participants live with hope. This emotion is completely opposite to fear, because its presence affects the positive thinking of the outcome of the trade. In moments of hope, the thinking of market participants is aimed at making profit, not losing it. People trade in order to achieve success and financial stability, taking income from the market. The circle of such people was divided into optimists and pessimists, absorbed in hope, fear and greed, only to different degrees. One way or another, an overabundance of these emotions can lead to losses . The best option is to find the “golden mean” and learn how to manage your emotions.💪🏻💪🏻💪🏻 😊😊I hope you enjoyed my post, don't forget to support me with like 🌞, subscribe,for don't get lost!💋 Below are links to my previous ideas👇🏻👇🏻👇🏻 Stay with me🌞 Your Rocket Bomb🚀💣
BITSTAMP:BTCUSDEducation
by RocketBomb
23
The Secrets to Forex & Protecting Your CarryYou must read the prior articles first. If this was a video game you would probably be trying to skip the conversation boxes at this point. Don't try to speedrun this, you'll die at the boss. --------------------------------------- I'm sure you're tired of all the poetry and want to get straight to the money. Money, after all, is the best form of entertainment. Now, last time we left off with timeframes and carry conditions, key components of the overall risk management message I want to get across. I figured that most retail traders operate on multiday/multiweek positions. Most know next to nothing about carry risk or other unique risks present only for non-intraday traders. If you intend to hold positions across several weeks/months (see pt. 3 for the definition), then this section is the most important of all the articles to come. In addition, I recommend doing additional research, especially if you have a job, are in schooling, or other responsibilities; because understanding this risk (and potential reward) can be very beneficial for those with limited time to spend. Part 1: Country-level Assets All wealthy people own assets. Assets can appreciate. If you 'own' a lot, you are, by default, wealthy. At least, for a brief moment in time. When you trade in forex, you are investing in a type of asset underwritten by a 'country' and paired with a similar underlying. The country creates the supply, and sets minimum standards in demand via tax law. Like businesses with stocks, countries with currencies and bonds can default, and flatline, leading to a breadline utopia. Inversely, they can also grow, and produce something of market value; and then provide returns to everyone that bet something on them. Some countries are flailing about, some countries are stable, and some are growing with seemingly no obstacles in sight. Which one would you want to invest in? Remember the dividend question? Before some median-salary economist gets in a huff, yes it's not always as simple as 'growing country = growing interest rates.' But here's what's important for retail traders: Central banks manage these 'country-level' assets with an evolving toolbox to variable acclaim. I recommend doing your own research into that topic, because it's too far outside the scope of these articles, and there are no unified verdicts on the 'science' behind any of it. The important thing to understand is that when you invest in these country-level assets, some countries demand a fee rate, and some offer a dividend rate. THAT'S IT. Room temperature or higher IQs will get this. Part 2: Free to Play vs Fees to Play You can find these rates by googling: 'central bank interest rates.' Those negative rates are FEES TO PLAY. Zero or higher is FREE TO PLAY. If you hold currency at a broker, these rates are realized and charged or credited to your market position at the daily rollover event. This occurs at the end of the 24hr cycle set to City time. So if you hold positions over 24hr cycles, you will be charged or credited REAL MONEY (no delivery gimmicks). Now, you can't trade currency in isolation in forex, it's always in the form of a pair. In case you haven't figured this out yet, the forex trader is the type of player these articles are designed for. This means, in lazy phrasing, that you are betting on the demand for the money (investor appeal) of one country AGAINST another. If you want to invest in a country as is, you can opt for national or municipal bonds, but note they do have slightly different carry conditions. But to stay on target, what do you think happens when you match a higher rate with a lower rate? The USD is a higher rate than the JPY. The USD is free to play, the JPY charges a fee to play. When you open a position in the market, you are FUNDING one of those currencies (basically against the other). This means you are liable to the interest rate gap. Brokers have an unnecessarily complicated explanation for why they HAVE to pay you money (or take your money) even though price action may not technically move from 23:59 to 00:01. They want to balance the books in a way they are comfortable with, because they have lots of liabilities with major liquidity providers. The net takeaway is that most brokers will generally charge or credit based on the interest rate gap between the currencies in your selected pair. So carry conditions are relevant accross most brokers unless you have a based Islamic account. Note that most brokers have a separate fee (usually .25%), which means if the interest rates are equal then you still get charged at rollover. There are other subtractions brokers will make as well (never in your favor), sometimes cutting deep in the rate gap. Unsurprisingly, they want to pay you as little as possible; in some cases, you can be charged on rollover regardless of gap or position direction. This is why you need to check the 'specification' of the pair in your MT4 to see the swap (or use a calculator provided by your broker.) Some brokers have special rules for emerging currencies with high rates like 8%, other brokers may offer advantages for trading these depending on their business structure. Wed to Thurs rollover is a x3 event , basically to make up for the lack of a rollover event on Sat and Sun night. You're probably wondering why these 'small percents' matter. After all, you're in forex to make highly leveraged internet magic money, not some quarterly dividend payment like your boomer parents. Part 3: Make America Think Again But it's just pennies a day right, who cares? Carry conditions can cost or credit you pennies a day or thousands of dollars a day, depending on the size of your position or the pair in play. On some pairs, you can make 15~ USD a day with just 1 lot in the market. That's over 5k a year USD. That's the equivalent of 540 pips a year, WITH 1 LOT ON 1 PAIR. And all you have to do, is fund a high rate currency bet against a low rate currency on a popular broker. That's it. No technical moonworshipping required. No stalking some coin startups social media for pump and dump schemes. No staying up all night worrying about the West going to war with Iran because you longed the Euro before dinner. It's the opposite of the coin flip, its coin printing. Many retail traders are from developing and emerging countries, it can be an excellent opportunity for men and women of all ages. Its like working at Wall Street and sending the remittances back, all from the ease of your home; without any political, religious, cultural, or economic barriers to get in your way. Sure it's not really that convenient. But the analogy would've been really cool if it worked. So what can happen, for example. At .40 lots for a full position, you would net 1.80 USD a day. Assuming 2 weeks to fill a position at optimal entry points (we'll talk about this later), and a remaining 2.5 month duration (5 fortnites), you net about 130 from carry credit payments during that trade period (1/4 a year), and be able to close with a very profitable or at least at a net-positive price level. Keep in mind, the average yearly takehome is anywhere from 2k-10k in developing countries. 1.8 a day can represent significant supplimentary income, and you only need 100-250 (in USD equivalent value) to support margin at most brokers. You could reinvest those winnings over the course of the first year and start the next year earning 7-8 USD a day. Now some of you might have more cash to waste. With a career in a developed country, maybe you have 25-50k to responsibly throw around in your 20s, no family, STEM job, good rent contract, little student debt, etc. We can upgrade that position size to 4 to 8 lots. 18-37 USD per day. You'll be doubling (before tax) your initial capital every 4 years. Part 4: Fields of Pink But wait, what if you have the opposite position? You fund a low rate currency against a high rate currency, or your trash broker demands fees on both. Your inverted head and shoulders 4h pattern looks (and smells) great, and you're ready to long the EURUSD. You plan to hold this one for a month at least, until it hits some absolute number like 1.200 (because it's the fifth wave in some model a statistician invented 40 years ago), and therefore, must happen. You decided your 'RR' would be 3 to 1, a 150 pip stop loss and a 450 take profit. You're already taking a tendie loan out at KFC in anticipation of a big win down the line. Meanwhile, you're losing 13 dollars a day (or let's say 0.5-2 pips worth of loss), guaranteed. Because you're paying a fee to play, while taking a bet that fails at a near 50% rate (much higher for retail), while throwing away weeks/months of time in anticipation of a result/delivery (capital opportunity cost). Now, if you had ten thousand years of nutritionally deficient ancestors, I can't blame you for this decision-making. But most of us haven't. So here it is, another forex secret: Quite simply, there are pairs the vast majority of you shouldn't be trading, and that includes majors with poor carry conditions (losers both ways with rollover). Pairs like CHFJPY, or any pair that has you longing the JPY or CHF (and usually EUR). Betting against the USD is another insured risk, when looking at majors. It doesn't mean you should never fund a low rate against a high rate, but you need to think in terms of FEES. Is it worth paying a daily fee to make this trade? Now, for the greedy. You'll need to do your own research, to decide if hunting extremely high rates on emerging/exotic currencies is the best course for you and your margin, of if settling with minimal (but not negative) rates on crosses or other majors is good enough for your strategy. My guidance is to look into emerging currencies if you don't have much time to trade daily (someone with a full-time job or family) or you don't intend to sink 1,000s of hours into mastering the intra-day trade (nightmare mode). Part 5: Washington Consensus Trading with carry conditions in mind can even be advantageous compared to other asset classes (like stocks or corporate bonds). It's like trading a high yield junk bond, only you have far less risk from defaults. What's a safer institution? Some 5 month-old, toothbrush-sharing, 10 slide company with 8 employees, or the full might of a nationstate? Sure, a few nationstates have defaulted in modern history. The upside is you usually have lots of heads-up, because default tends to be political in nature. That is, if you're a nation in need of cash, you can always get a loan. It's simply a matter of if the terms are politically acceptable for your faction. This all factors into the 'heads-up' period, alerting you to pull out or reverse your position. The US tends to sanction them beforehand (conveniently) kicking you out of those markets ahead of total economic disaster. The complete opposite occurs with some shady junk bond at 15%, where the company disappears overnight. Companies fail for the smallest things, they fail all the time, and the world goes on. A country failing is always geopolitical in nature and market rules about fair play are thrown out the window. This is an intrinsic advantage to forex and global macro tradables in general. I'll talk more about the future risk of national defaults and the utility and primacy of forex as an asset class in the final article. So beyond the obvious consideration, which is to fund a high rate currency against a low rate; what pairs should you trade and how else could you mind carry conditions while holding a long term position? Should you stick to emerging (exotic) currencies against safe-haven currencies? IE, you only short the EURMXN or fund against the CHF? And what indicators/models (from article pt.2) should you use to achieve the safest average price entry? Part 6: Not All Edges are Sharpe Forex is highly volatile, so you may have an advantage in the carry conditions, but suffer a net loss from a poor initial position when you decide to close. A currency with a negative rate could move against you, bigly. Remember, the future holds unlimited risk. But the distinction here (as mentioned in the prior article), is the resilient value in understanding that contracts can have insured risk outcomes. Cost/benefits that are legally settled (from the past) at the point of opening position and at the rollover event, even if brokers tinker with the point payouts, the 'deal' is still there in some form. Here's a poorly kept institutional secret, greed often drives the price in the direction of the higher interest rate currency in a pair over multi-month periods, so this doesn't really matter. Wealthy investors are greedy for higher payouts from emerging countries: where labor is cheaper, new factories spring up all the time, and real estate can be opportune. Part 7: Bat Soup vs the Fortune 500 Old school risk theory in markets argues that high volatility = high risk, but in recent years it has evolved beyond such mathematical explanations, especially as consecutive market challenges broke paradigms. Boomers are slow learners, but they adapt quickly when they start losing money. The subprime crisis cost them big time. And it's true today for our sniffle pandemic. It's simple: On high timeframes across longer-term positions, macroeconomics and geopolitics reign supreme. This isn't just a forex rule. This has been true since the dawn of markets in human society, it is true today, and it will be true in the end. Regulation and interest rates are variables that follow those leaders (not precede). That is, their behavior is shaped by the first two; macro and geopolitics. Think about COVID-19. Look what a few bats and one strange wet market did this world. Macroeconomics and geopolitics produce basic patterns in the human brain that propagate through our societies as two different frequencies: the short wavelength called fear or the long wavelength called security (interpreted in complex ways by players in markets). These are filtered by timezones, languages, civilizational and organizational biases, technology, individual upbringings, and the incumbency of delusion and greed. Nanoseconds, or years later, this all gets represented as a market outcome on a chart. Amazing that people spend so much time analyzing the chaotic patterns of some shit on a floor instead of what was on the menu last night, when they try to understand what went wrong. So if you can understand markets during these strong periods of psychological stress, and during soft periods of algorithm auctioning and market making (call it ranging), then you can sail all the seas and survive all the storms. This is where concepts like seasonality, ATR, regressions, psychological origination, hedging, news trading, major moving averages, and others come into play. In the coming weeks, I'll start to break down the major components of those, and where the center of price gravity and extremes are for these higher timeframe, longer-term positions. So you can find the optimal entry opportunities for longer-term trades, while also taking advantage or hedging against carry conditions. It's time to start charting the course.
Education
by CountofCoins
Crypto Fear & Greed Index can tell you when to buy BTCWhy Measure Fear and Greed? Crypto market behavior is very emotional. People tend to get greedy when the market is rising which results in FOMO (Fear of missing out). Also, people often sell their coins in the irrational reaction of seeing red numbers. With our Fear and Greed Index, we try to save you from your own emotional overreactions. There are two simple assumptions: Extreme fear can be a sign that investors are too worried. That could be a buying opportunity. When Investors are getting too greedy, that means the market is due for a correction. Therefore, alternative.me analyze the current sentiment of the Bitcoin market and crunch the numbers into a simple meter from 0 to 100. Zero means "Extreme Fear", while 100 means "Extreme Greed". You can find the indicator in TradingView and it is quite amazing what it shows. In a bull market, it actually shows you great buy opportunities for buying the dips or playing the swings! Hope you will enjoy it! If you like this post give us a like also. Thank you!
COINBASE:BTCUSDEducation
by Samoto
3