Trading psychology accounts for 60% of trading and emini trading is no exception.
Most of us make trading mistakes in ways that are irrational, emotional and mere reactions triggered by our instinct for survival.
Emini Trading Can Be Intimidating
Markets work in such ways that the only thing that is sure about them is intimidation and sudden moves in the ‘opposite’ direction, almost as if someone manipulates this action to create fear.
There’s no real manipulation, however you may call it collective manipulation by experienced traders who are not interrelated among them. Some form of trading psychology affects so many traders that being a good stock trader is almost like going against human nature.
Examples Of Intimidating Market Action
- Stop running, there’s a tendency by brokerage firms to advise their customers to place stop loss orders right below yesterday’s low (in an up market) guess what the market does… it drops like a rock all the way to yesterday’s lows, it breaches them completely then it rallies back up like a rocket, most of the time I know for sure that the market will not rally before shaking out these pathetic traders.
- The principle of uncertainty, such as in March 2003, the uncertainty was , will there be a war confrontation with Iraq or not? Markets don’t like uncertainty so the decline continued throughout this period of ‘maybe’ but as soon as the invasion started, on that very night of the first Cruise missile bombings, war became certain (Hence the uncertainty was removed), and the emini futures contracts surged much higher! Now who would have dared to buy the market while war was breaking out? It goes against human nature!
- Buy the rumour, sell the news! Most ‘news’ and ‘inside, privileged’ information is already baked into the cake long before it reaches you, yet most people try to relate the early morning’s little up move by some supposedly positive market news, and what happens then? As soon as the ‘good’ news is out, the market drops so much that defies belief. Never relate green market action to good news and vice versa.
- The false psychology of the president of the US speaking about… what else but ‘good news’ to come (Have you ever seen a president making bleak predictions? Never! Markets however do go down).
- The false psychology of zodiac signs and superstitious beliefs. (This is my favorite one, we all want to have something to laugh at).
Psychology Plays Its Part
With all forms of investing and many other aspects of life, there’s intimidation or someone trying to fool us, it happens in poker where the good players will fool new players into thinking they have the upper hand by just increasing bet size, and forcing these new players to think about the money and at that point they will fold! They just fold, give up handing over their bets to the experienced poker elite players.
Psychology is even more evident in the military, everything in the military is based on deception and fooling the enemy, the ill-tempered will always lose in the end. Did you know for example that at night the enemy may fire at you in an effort to trigger your instinct for survival, so that you fire back purely driven by emotion? As soon as you do that the enemy will visually pinpoint you, and you are history!
The elite SP500 emini trading professionals have mastered fear and greed, have mastered their emotions, and for the most part, they remain so farsighted in the markets that no simple trick can fool them. Knowing how to spot these tricks and take advantage of them is very rewarding in the markets and particularly on the emini futures contracts.
