Is psychology aspect of trading quantifiable ?

Discussion in 'Psychology' started by highstake, Dec 21, 2006.

  1. Any one knows ?

    Theory on how to value equity from fundamental aspect is pretty mature now, but what about the psychology aspect ?

    Anybody works on this area ?
  2. Sure. Download the "errors committed / rules violated" template by Scientist and go over his and others' posts in this thread:

    See if you can adapt the template to your needs or come up with your own. Then get into the habit of using it, in writing or on a computer, every day you trade.
  3. thanks for the link.

    I think that file is for self-discipline purpose.

    I was looking for a model to put the psychological aspect into equity price.

    for example : GOOG is super hot --> high premium

    BHIP is underdog --> high discount
  4. Oh. Never mind, then.
  5. How much are the hopes, confidence, expectations and fears of the market reflecting on the price of a security? 100%
    It is said that the value of a given stock is the Sum of all future dividends brought to present value... to calculate this {since we do not know what the future dividends are going to be} we take the next
    (expected dividend/current dividend) -1=g

    (Current Div. + g)/(g-inflation) gives you the dollar value of a stock, in theory.

    So the psychology of the market is reflected on every step when determining the value of a stock... as for trading, you can see the change in market psychology by looking at the price... when you see the intraday price of a stock, what you´re basically seeing is how the expectations that market participants have on that stock change during the day in the light of new information.

    In the end it doesn´t matter how much the stock is actually worth... all that matters is how much does the market think the stock is worth. The same happens with the US dollar, the Euro or any currency. The actual worth is irrelevant... all that matters is how much confidence is the public willing to put on that piece of paper, it´s nice little colours and the nice little portrait of some dead guy wearing a wig.