Fear & Greed

Quick lesson from the stockmarket - we hold stocks until they fall out of greed, and we sell stocks as they bottom out of fear. In both cases the weak mind leads to loss.

OK I knew this and I thought I had learned the lesson last year - but no, still made critical mistakes in the recent rally and lost to tune of £600 - so that is my earnings from last year lost. I'm still quits after all my trading.

The Evening Standard cat has been picking stocks apparently and is up 14% which is better than the professionals who played along side. If the market is random then a dice will do better than a human who is swayed by imagination and desire.

Stock Market Models
Regarding stock markets the price change of any stock is towards its perceived future price. "Fundamentals" don't actually set price they only weigh upon the minds of investors influencing the "perceived" future price. Rallys do the same regardless of fundamentals.

Predicting the "news events" is a good way to predict the price. If we can guess what news will occur then we can see how the future "perceptions" will be changed, and through this the future price.

So actually perceptions about future news events will impact prices also. So if enough people believe that good news will be reported then the price will rise. Therefore we don't need to predict the news, only predict that people will believe that there is good news coming... etc etc

In the stock market we are part of a huge game of mirrors each trying to outbluff the other. Inexperienced traders(like myself) often complain of buying at tops and selling at bottoms. This is a feature of the market being populated by traders playing a higher order game. They know how people behave - holding through greed and selling through fear - so to beat the masses they sell when people are greedy and buy when people are afraid.

But (and Buffet etc don't say this) the stock market starts to become populated by savvy investors. We can now expect a sizable population of traders to do this - which cancels the old Japanese insight of greed and fear. So the next level is to understand that the majority buy when they feal safe and sell in fear. Then a large population do the opposite: buying in fear and selling in safety - which will promote prices after dips and shorten peaks. So a new level of conscious is needed to play this game ... and that is where I head next (tho maybe should get my first stage sorted after playing a dumb game in the recent rally - can you believe I bought into the rally and sold as it collapsed - school boy error).

Another feature tho which weighs on me is the morality of it. I resisted buying banks and dumped them asap because I don't want to be an owner of such predatory and evil business. I don't want to hold construction shares either because I don't beleve in construction. I don't want to hold essential commodities because I don't want to see the price hiked for things people actually need. In actual fact I'm left with a heavy conscience wherever I lay my money because I don't really believe in capitalism - tho at least I'm not collecting dividends and I'm just gambling.

So I've decided on CRUD and LOIL. If oil prices rise it can only be good because it stops economic growth and pollution and it increases the value of human labour. Plus at the current levels there is a hell of a lot of upside available!