#Bitcoin $BTC $ETH #DeFi #cryptocurrency #trading
1/23
Market Psychology
1. Understand the "nature of market"
2. Understand psychology of participants
3. Develop the right attitude
4. Take an action
5. Tools
1/23
Market Psychology
1. Understand the "nature of market"
2. Understand psychology of participants
3. Develop the right attitude
4. Take an action
5. Tools
2/23
Nature of markets
Is nature; hostile, benign or neutral? Nature is neutral to observer. Weather is current condition of that observation. It can be interpreted in many ways.
Nature of markets
Is nature; hostile, benign or neutral? Nature is neutral to observer. Weather is current condition of that observation. It can be interpreted in many ways.
3/23
- Market is similar to nature; it is neutral towards participants.
- Market participants can predict the market sentiment (weather).
- They can take an action based on their prediction.
- Market is similar to nature; it is neutral towards participants.
- Market participants can predict the market sentiment (weather).
- They can take an action based on their prediction.
4/23
Market cycles:
A) Contraction phase
B) Expansion phase
C) Trend-setting phase
Market cycles:
A) Contraction phase
B) Expansion phase
C) Trend-setting phase
5/23
Contrarian
Person who habitually takes a view opposite to that held by the majority.
One must rid oneself of the bad taste of wanting to agree with many. "Good" is no longer good when oneโs neighbor utters it. And how could there even be a "common good"!
Nietzsche
Contrarian
Person who habitually takes a view opposite to that held by the majority.
One must rid oneself of the bad taste of wanting to agree with many. "Good" is no longer good when oneโs neighbor utters it. And how could there even be a "common good"!
Nietzsche
6/23
Retail
"The โcrowd' is most enthusiastic and optimistic when it should be cautious and prudent; and is most fearful when it should be bold."
Humphrey B. Neill
Retail
"The โcrowd' is most enthusiastic and optimistic when it should be cautious and prudent; and is most fearful when it should be bold."
Humphrey B. Neill
7/23
95% of the trading errors you are likely to make - causing your money to just disappear before your eyes - will stem from your attitudes from the four primary trading fears:
95% of the trading errors you are likely to make - causing your money to just disappear before your eyes - will stem from your attitudes from the four primary trading fears:
8/23
1. Fear of being wrong
2. Fear of losing money
3. Fear of missing out
4. Fear of leaving money on the table
1. Fear of being wrong
2. Fear of losing money
3. Fear of missing out
4. Fear of leaving money on the table
9/23
Greed
Much of the emotional power of greed comes from a form of hope, where the expected reward far exceeds the expected time and cost to be invested.
Greed
Much of the emotional power of greed comes from a form of hope, where the expected reward far exceeds the expected time and cost to be invested.
10/23
Fear
We are quite skilled at imagining what might happen, but also fear of things that may not happen cause us stress and allow others to persuade us.
Fear
We are quite skilled at imagining what might happen, but also fear of things that may not happen cause us stress and allow others to persuade us.
11/23
Herd mentality
Mob mentality - pack mentality, also lesser known as gang mentality, describes how people can be influenced by their peers to adopt certain behaviors on a largely emotional, rather than rational, basis.
Herd mentality
Mob mentality - pack mentality, also lesser known as gang mentality, describes how people can be influenced by their peers to adopt certain behaviors on a largely emotional, rather than rational, basis.
12/23
Develop the right attitude
Be like water
Water shapes its course according to the nature of the ground over which it flows.
Art of War, Sun Tzu
Develop the right attitude
Be like water
Water shapes its course according to the nature of the ground over which it flows.
Art of War, Sun Tzu
13/23
In a trading context: When you hear traders defend their market assumptions as if theyโre guarding some kind of treasure, it signals their vulnerability.
In a trading context: When you hear traders defend their market assumptions as if theyโre guarding some kind of treasure, it signals their vulnerability.
14/23
Trading Biases vs. Predictions
Predictions
How meteorologist predict the weather
Weather can be as unpredictable as a dice roll, weather forecasters apply a branch of math with roots in gambling.
Trading Biases vs. Predictions
Predictions
How meteorologist predict the weather
Weather can be as unpredictable as a dice roll, weather forecasters apply a branch of math with roots in gambling.
15/23
The probability of an event happening can range from 0 to 1, with a probability of 0 meaning the event is impossible and a probability of 1 meaning the event is certain to happen.
The probability of an event happening can range from 0 to 1, with a probability of 0 meaning the event is impossible and a probability of 1 meaning the event is certain to happen.
16/23
Trading bias
Prediction is defined as a forecasting statement on how things will be in the future. Making a prediction means that you are expecting a certain outcome.
Bias refers to an inclination or outlook.
Trading bias
Prediction is defined as a forecasting statement on how things will be in the future. Making a prediction means that you are expecting a certain outcome.
Bias refers to an inclination or outlook.
17/23
Having a bias means you believe that a particular kind of behavior is more likely to occur than other alternatives.
In trading, being bullish or bearish on a currency is a form of bias.
As a trader, you must develop biases instead of simply making many predictions.
Having a bias means you believe that a particular kind of behavior is more likely to occur than other alternatives.
In trading, being bullish or bearish on a currency is a form of bias.
As a trader, you must develop biases instead of simply making many predictions.
18/23
It is normal to have biases. However, it is important to discern if market behavior confirms your biases before acting on it by taking a trade.
Market is Nature. It couldnโt care less about where you think the price will go. The market will go where it pleases.
It is normal to have biases. However, it is important to discern if market behavior confirms your biases before acting on it by taking a trade.
Market is Nature. It couldnโt care less about where you think the price will go. The market will go where it pleases.
19/23
Tools
Market sentiment analysis
1. Lower timeframe: Yearly, Monthly, Weekly
2. Higher timeframe: Daily (Market Profile โ TPO)
3. Spot vs Derivatives
Tools
Market sentiment analysis
1. Lower timeframe: Yearly, Monthly, Weekly
2. Higher timeframe: Daily (Market Profile โ TPO)
3. Spot vs Derivatives
20/23
4. Market sessions (NY, Tokyo, London)
5. CME sessions
6. CME report
7. Premium
4. Market sessions (NY, Tokyo, London)
5. CME sessions
6. CME report
7. Premium
21/23
8. Open interest
9. Open value
10. Cumulative Volume Delta (CVD)
11. Net longs vs shorts
12. MDR Marker Depth ratio vcdepth.io
8. Open interest
9. Open value
10. Cumulative Volume Delta (CVD)
11. Net longs vs shorts
12. MDR Marker Depth ratio vcdepth.io
22/23
13. Funding rates schedule
14. Liquidation data
15. BTC-USD inflows outflows
16. Price Action
17. Market Profile
13. Funding rates schedule
14. Liquidation data
15. BTC-USD inflows outflows
16. Price Action
17. Market Profile
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