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Harding phenomena in behavioral  trading

Harding phenomena in behavioral trading

Harding phenomenon

 


What is the ''Harding phenomenon''?
The harding phenomenon is a word that comes from the English word "Herd" (flock), and means that human beings tend to act according to the thoughts of others and many people.    Speaking of phenomena that are familiar to us, we buy products that are in fashion, and the queues call for more queues.The Harding phenomenon is known as one of the insights in "behavioral economics", but a synonym in behavioral economics may be the "bandwagon effect".   Behavioral economics has the perspective that "humans seem to be rational and behave irrationally" and "the economy created by humans also has irrationality born from such a psychological aspect", and stock investment and economy It can be said that it is one of the academic fields that are attracting attention in economics. We can see this tape of irrational behavioral action lots of times in financial markets when we see when price makes big divergence  agains company fundamentals. 

 

Is behavioral finance useful for investment?

 

Behavioral finance is the study of the influence of psychology on the behavior of investors or financial analysts. It also includes the subsequent effects on the markets. It focuses on the fact that investors are not always rational, have limits to their self-control, and are influenced by their own biases.


An example of the harding phenomenon in stock investment is the case where the stocks being bought are bought further and the high price is renewed.  In addition, it can be said that the irrationality of the harding phenomenon was glimpsed in the bubble formation of the subprime loan market that started the Lehman shock.   

Especially if you are a beginner in investment, you may intuitively think that the stocks that are going up will go up even more, and you may buy them and grab a high price. Behavioral economics proposes that human beings have the property of "heuristics" in which they make decisions based on past experience, apart from making logical thoughts when making decisions.  For example, this heuristic works well when multiplying and when making daily habits, but when it comes to investing, that thought can be a nuisance. Emotional investment decisions that are not based on rules do not have a statistical advantage and the method does not always work.   It is often said that "90% of individual investors lose", but many of them include failures due to lack of understanding of human irrationality and psychology. Isn't it?     Then, what kind of attitude should we take in investing so that we do not lose 90%?

 

Metacognition is important


In trading, it can be said that there is no way of thinking or method that "if you do this, you will definitely win", but what is important is "metacognition".  "Meta" is a prefix that means "beyond" and "contains", and "metacognition" means "recognizing cognition."   It is confusing to write cognition as cognition, but it can be said that it refers to the state of being able to see oneself objectively, what one is thinking.
What I am doing now can only be expressed from my own experience.   However, by reading a book or learning a new concept, you will be able to express that behavior in a new way.


Behavioral economics focuses on human scientific psychology, and human psychology such as "status quo bias" and "loss effect" will help us to see our thoughts and actions objectively.
If you are an investor, you will understand that you can trade calmly when you are winning, but you will panic or your mentality will be shaken when you are losing and you will make an appropriate trade. I think you have some experience.   Of course, everyone suffers failures and losses, but in order to reflect on them and improve them, it is of course important to omit "why did they fail?"   In the process, metacognition may be useful for verbalizing and embodying failure.   How to acquire metacognition   As a way to acquire metacognition, as I wrote earlier, reading a book to acquire new knowledge and making it a habit to draw a cycle to improve one's behavior can be mentioned. It may be a good idea to notice ideas and habits that you are not aware of and try to live while being aware of how to correct them.


If you know the word "harding phenomenon", you should have the perspective of "because it is a harding phenomenon, isn't it profitable to make a contrarian here?" Can be done.  It will be possible to broaden the range of investment and thinking by not only synchronizing with the way of thinking around you, but also by firmly holding your own investment axis.   Learning the knowledge of behavioral economics, not limited to the Harding phenomenon, is useful for making investments, so it may be good to learn it.

 

  WHAT IS HARDING PHENOMENON IN TRADING? - YouTube

 

 

HOW TO AVOID RANDOM WALK MARKETS

HOW TO AVOID RANDOM WALK MARKETS

 

RANDOM WALK

The random walk theory is a theory that explains that "the movement of stock prices cannot be predicted." Simply put, no matter what has happened in the past, there is always a 5: 5 chance that tomorrow's market will go up or down.

 

However, I am not saying that you “Cannot profit from the market”. The share price is an estimate of the company's value, but since the company is expected to continue to operate and make a profit, it will grow in the long run. This is the same theory. The conclusion of this theory is that "Active management cannot defeat passive management in fund management."

 

Speculative trading

Speculative trading is a method of aggressive buying and selling in order to generate P/L  profit above the market average. The market average does not mean the average of the investment performance, but a stock index such as the SPX 500 average or the NASDAQ 100 average. In other words, regardless of whether the overall stock market is going up or down, the goal is to make more money anyway. Consequently, the person “Prop Trader” makes the decision to buy or sell.

On the other hand, the method of targeting investment returns equivalent to the market average is called “Passive investing”.

For example:

 -If you are using the SPX 500 as an index investing, you can buy stocks from index and build a portfolio.

Much less room for human judgment right?

So why can't active trading outperform passive investing? In active trading, the professional manager makes full use of theory and data to determine when to buy and when to sell. However, using the theory of random walks based on the theory of probability, it is impossible to predict the market price no matter which method is used. Sometimes it succeeds, and sometimes it does not, and the result is at the level of the market average. However, active trading is more expensive for managers and inventory analysis, so the results are worse than passive investing.

 

How to avoid random walk situations

-Trade only liquid markets

-Trade only blue chips

-Trade with mkt flows

-Trade news

-Trade during mkt opening or in the mid-day

Why will women traders take over the world soon ????

Why will women traders take over the world soon ????

Why will women traders take over the world soon ????



1) We all know that the womans can study much faster. Trading at a higher  level requires countless hours of study and focused research. The same holistic approach to learning that helped many women in elementary school will also benefit them in their careers as a trader. They tend to be more attentive, persistent, and more eager to learn than men. The biggest plus in trading is the speed of solving problems, that is, the operational speed is much faster for women than for men. Therefore, the Head of Trading or Head of Treasury departments prefer to hire female traders on the desk.

 A WOMAN IS UNSTOPPABLE AFTER SHE REALIZES SHE DESERVES BETTER

2) Women are excellent  at multiple  tasks. And they do it better than men. Watch how women traders manipulate several positions and track financial indicators, precious metals, technologies, commodities, repo deals and Eurobonds, and now try to find a better repo deal performer than an aggressive girl ... Any other alpha male would have given face to his boss from countless repo transactions that need to be closed for the new year. 

   WONDERFUL STRONG ELEGANT AMAZING CONFIDENT

3) Women are more inclined to take risks. You may remember this thorough study, which showed that women are better investors than men because they are no longer risk averse. Men hold bad trades longer and suffer big losses. It turns out that testosterone isn't always your friend.

Compare a man a trader and a woman. When a woman loses a loss, she immediately runs to solve the problem, while the alpha male takes a bottle of whiskey and starts taking even more risks and does this until he lowers his account to zero or gets a rolling pin in the bastard from a angry wife who pulls out a computer and says when you will become a normal person.

IM SORRY YOU SEEM TO HAVE MISTAKEN ME FOR A WOMAN WHO WILL TAKE YOUR SHIT-Ali Parker

4) Women have the best role models. The women are still working on the glass ceiling. They need to be smarter, sharper, and of course better behaved if they want to be successful. If you take global banks, then there are alpha females in expensive glasses and are actively drawing fat clients into the client base, clevering their CFA with mega words ... And what can men do ???? Current only yell Trading is not about talking is about making money !!!!There are still too few female executives, but they outperform their male counterparts by not making headlines for bad behavior while managing their personal lives successfully.

 DONT BE A WOMAN THAT NEED A MAN, BE  A WOMAN THAT A MAN NEEDS

5) Women always look good and take care of themselves, especially those who cut money. Yes, yes, it's true ... And better take care of yourself before it's too late, the world will be seized by traders women, politicians, women, and so on. ).

 
Why will women traders take over the world soon ????

PS: I JOKE A LITTLE BUT 98% HERE IS TRUE

Sentiment Zone Oscillator-By Walid Khalil, CFTE, MFTA

Sentiment Zone Oscillator-By Walid Khalil, CFTE, MFTA

Sentiment Zone Oscillator-By Walid Khalil, CFTE, MFTA


Intresting tool for traders "Sentiment Zone Oscillator" (SZO), that was made by Walid Khalil that was introduced in "Stocks and Commodities" Magazine in May 2012. SZO is tracking swings in the marker sentiment.

GandalfProject ResearchSystem-by Domenico D’Errico and Giovanni Trombetta’s PhD

GandalfProject ResearchSystem-by Domenico D’Errico and Giovanni Trombetta’s PhD

GandalfProjectResearchSystem-By Domenico D'Errico and Giovanni Trombetta's

 

The Gandalf Project Research System strategy was published in the August 2017 "Stocks and Commodities" article titled "Artificial Intelligence For System Development" by Domenico D'Errico & Giovanni Trombetta.

Tokmurzin Askar
Tokmurzin AskarOwner of WIN-ALGO.COMsales@win-algo.com
PROFILE: Stock and bond trader. In-depth knowledge of market making and running client prop book. Algorithmic trader and trading systems developer. SPECIALITY: London GDR’s & Kazakh cash equities, Eurobonds and international future contracts on indices & currencies. Proprietary trader, long/short for maximum returns. More than 14 years of International career in front office positions, as head trader and head of trading in Investment banks. Experienced market maker for more than 50 emerging market securities.
RISK WARNING:

Past performance is not necessarily an indicator of future performance.

These results are based on simulated or hypothetical work results, which have certain inherent limitations. Unlike the results shown in the real performance report, these results do not reflect real trading. In addition, since these transactions have not actually been completed, the results may not be adequately or excessively offset by the influence, if any, of certain market factors, such as lack of liquidity. Modeled or hypothetical trading programs in general are also subject to the fact that they are developed based on previous indicators. None of the reported system performance reports guarantee that any account will achieve the same profit or loss ratio close to those shown.

 In addition, hypothetical trading does not involve financial risk, and the indicators of a non-hypothetical trading report cannot fully take into account the impact of financial risk in actual trading. For example, the ability to sustain losses or adhere to a certain trading program, despite trade losses, is a significant factor that can adversely affect the actual results of trading. There are many other factors related to the markets as a whole or to the implementation of any particular trading program that cannot be fully taken into account when preparing hypothetical results, each of which can adversely affect the actual results of trading.

Futures and forex trading contains substantial risk and is not for every investor. An investor could potentially lose all or more than the initial investment. Risk capital is money that can be lost without jeopardizing ones’ financial security or life style. Only risk capital should be used for trading and only those with sufficient risk capital should consider trading. Past performance is not necessarily indicative of future results.