Posts Tagged ‘Trade Psychology’

Phil Davis’ Mircowave Oven Theory of Behavior

I mentioned my Microwave Oven Theory this morning and I didn't realize it was hard to find so here it is again:

Last Thursday, I mentioned that Jim Rogers said:

I am as confused as anybody else (about the level of bearishness on the Euro).  Usually that indicates a rally… Once a technical rally starts, who knows where it can go from that. 

Don't you wish other people would be that honest with us?  It's very hard for people who give opinions for a living to stand in front of an audience and say: "I don't know."   Somehow they seem to feel that they HAVE to know and, what's worse, once they force themselves to make a decision, they somehow feel obligated to defend it, even if new evidence comes out to the contrary.

This is exactly what's wrong with financial reporters and analysts, especially the clowns on TV (as well as pretty much anyone who makes a living giving you their opinion).   My Members are familiar with something I'm going to share with you now.  It is a Nobel Prize-worthy theory that I feel helps make me a better trader and I thought this would be a good time to share it with you:

People love to make random decisions and stick to them like they were directly given it as a commandment!

How does this relate to microwaves? Well, aside from the fact that our brains are constantly being fried by the things every day (ever drive on the highway and see one of those dishes aimed right at you?  Do you know birds die if they fly too close to them?), this is what I observe:

You put something in the microwave, say pizza, and you put in a time, say 3:33 (or maybe you are a whole number person and do 3 or 4 minutes). Now, unless you are a chain store pizza buyer your pizza slice is probably not always the same size or maybe it has different toppings etc., but you probably put in the same number every time.

Theory number 1:  People tend to repeat behavior, especially if it was successful in the past.

So the light goes on and the little thing spins…
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Phil's Favorites

Three reasons it's not 1929

 

Three reasons it’s not 1929

Courtesy of 

I could be wrong, but let me point out three things that I think about when I hear Great Depression analogies being made to the current crisis.

The first thing I think about is that the financial markets of the 1930’s were prehistoric. Yes, the Federal Reserve was in existence, but it was nowhere near as powerful and it hadn’t had any institutional memory (or history) to draw on. Its basic structure was patterned on the still-nascent central banks of various European countries thanks to the listening tour Senator Nelson Aldrich and others had made across the Continent. Fun fact: the US Sen...



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Biotech/COVID-19

5 reasons the coronavirus hit Italy so hard

 

5 reasons the coronavirus hit Italy so hard

A nursing home resident in Rome is moved to a hospital. Mauro Scrobogna/LaPresse via AP

Sara Belligoni, University of Central Florida

Italy is one of the nations worst hit by the global coronavirus pandemic. As a scholar in the field of security and emergency management who has studied and worked in Italy, I have determined that there are at least five major reasons why the country is suffering so much.

1. Lots of old people

Italians have the ...



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Zero Hedge

"What Is Really Essential"? In The US Golf And Guns, In France Wine And Pastries

Courtesy of ZeroHedge View original post here.

Among countless other unprecedented changes and transformation, the coronavirus pandemic has unveiled an odd divergence within global cultures: the definition of what's deemed "essential" for people across the world, and what things we really can't do without, even though we might not need most of them for survival.

As AP reports, in its attempt to slow the spread of the virus, authorities in many places are determining what shops and services can remain open. They'...



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Chart School

Big moving Averages and macro investment decisions

Courtesy of Read the Ticker

When price is falling every one wonders where demand will come in.


RTT black screen Tv videos study the simplest measure of price (simple moving average). What has happen before guides us now. 














Changes in the world is the source of all market moves, to catch and ride the change we believe a combination of Gann Angles, ...

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Kimble Charting Solutions

Tech Testing 9-Year Support, With Fear Levels At 2009 Highs!

Courtesy of Chris Kimble

Is an important Tech Index sending a bullish message to investors? It is making an attempt!

Does that mean a low in this important sector is in play? Humbly it is too soon to say at this time!

This chart looks at the Nasdaq Composite Index over the past 25-years on a monthly basis.

The index has spent the majority of the past 9-years inside of rising channel (1), as it has created a series of higher lows and higher highs. It created bearish reversal patterns in January & February as it was kissing the underside of the top of the channel and...



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Insider Scoop

With Everybody Stuck At Home, Investor Conferences Are Going Virtual

Courtesy of Benzinga

With the world at a COVID-19-induced standstill, many conference organizers have either gone online (Benzinga is one of them) or had to cancel upcoming events altogether. There is no clear timetable on how much longer we will be in this state.

Publicly traded companies are already limited in wh...



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Members' Corner

10 ways to spot online misinformation

 

10 ways to spot online misinformation

When you share information online, do it responsibly. Sitthiphong/Getty Images

Courtesy of H. Colleen Sinclair, Mississippi State University

Propagandists are already working to sow disinformation and social discord in the run-up to the November elections.

Many of their efforts have focused on social media, where people’s limited attention spans push them to ...



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Digital Currencies

While coronavirus rages, bitcoin has made a leap towards the mainstream

 

While coronavirus rages, bitcoin has made a leap towards the mainstream

Get used to it. Anastasiia Bakai

Courtesy of Iwa Salami, University of East London

Anyone holding bitcoin would have watched the market with alarm in recent weeks. The virtual currency, whose price other cryptocurrencies like ethereum and litecoin largely follow, plummeted from more than US$10,000 (£8,206) in mid-February to briefly below US$4,000 on March 13. Despite recovering to the mid-US$6,000s at the time of writin...



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The Technical Traders

These Index Charts Will Calm You Down

Courtesy of Technical Traders

I put together this video that will calm you down, because knowing where are within the stock market cycles, and the economy makes all the difference.

This is the worst time to be starting a business that’s for sure. I have talked about this is past videos and events I attended that bear markets are fantastic opportunities if you can retain your capital until late in the bear market cycle. If you can do this, you will find countless opportunities to invest money. From buying businesses, franchises, real estate, equipment, and stocks at a considerable discount that would make today’s prices look ridiculous (which they are).

Take a quick watch of this video because it shows you ...



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ValueWalk

Entrepreneurial activity and business ownership on the rise

By Jacob Wolinsky. Originally published at ValueWalk.

Indicating strong health of entrepreneurship, both entrepreneurial activity and established business ownership in the United States have trended upwards over the past 19 years, according to the 2019/2020 Global Entrepreneurship Monitor Global Report, released March 3rd in Miami at the GEM Annual Meeting.

Q4 2019 hedge fund letters, conferences and more

The Benefit Of Entrepreneurial Activity ...

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Promotions

Free, Live Webinar on Stocks, Options and Trading Strategies

TODAY's LIVE webinar on stocks, options and trading strategy is open to all!

Feb. 26, 1pm EST

Click HERE to join the PSW weekly webinar at 1 pm EST.

Phil will discuss positions, COVID-19, market volatility -- the selloff -- and more! 

This week, we also have a special presentation from Mike Anton of TradeExchange.com. It's a new service that we're excited to be a part of! 

Mike will show off the TradeExchange's new platform which you can try for free.  

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Lee's Free Thinking

Why Blaming the Repo Market is Like Blaming the Australian Bush Fires

 

Why Blaming the Repo Market is Like Blaming the Australian Bush Fires

Courtesy of  

The repo market problem isn’t the problem. It’s a sideshow, a diversion, and a joke. It’s a symptom of the problem.

Today, I got a note from Liquidity Trader subscriber David, a professional investor, and it got me to thinking. Here’s what David wrote:

Lee,

The ‘experts’ I hear from keep saying that once 300B more in reserves have ...



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Mapping The Market

How IPOs Are Priced

Via Jean Luc 

Funny but probably true:

...

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About Phil:

Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...

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