Typically, unsophisticated investors tend to buy near tops and sell near bottoms… exactly the opposite of what they should be doing. And there is a very good psychological reason for this. They start out cautious and then as others begin making more and more money in the market the Fear of Missing Out (FOMO) takes over and eventually they get in to the market. They may make a little money and decide they are geniuses and commit more and more money. Eventually, everyone with available money has invested and there is no one left to buy so the market crashes. The unsophisticated investor holds on initially knowing the market will rebound as it “always” has. Then he holds on because he has “lost too much to get out now” and finally when he can’t stand it any longer he sells vowing never to invest again. This turns out to be the bottom, as there are no more people left to sell, and the market turns up. But “once burned, twice shy” so the unsophisticated investor once again refuses to buy until the market nears another top and “everyone is making money in the market”.
Historically Investors Become “Long-term Buyers” at Precisely the Wrong Time
February 24, 2022 by Leave a Comment
“Time” – Key Factor for Options Traders
July 20, 2012 by
Editor’s Note: Options trading is almost as much about buying and selling time as it is about the underlying stock or commodity. In this article J.W. Jones explains the relationship between time and the price of an option and how to maximize your return based on the time value. Tim McMahon~editor The Passage of Time Leads […]
Fibonacci Techniques for Math Geeks — and Everyone Else, Too
March 29, 2010 by Leave a Comment
It’s hard to imagine a wrong way to apply Fibonacci ratios or multiples to financial markets, and new ways are being tested every day.
