7 Dec

What On Earth Is The Stock Market Thinking?


Just imagine ─ You can see inside the mind of the biggest companies. Every strategy they plan you see and hear. You are the proverbial fly on the wall. It sounds like a dream, right?

But think bigger.

Much bigger.

What if you could do that with the stock market?

Better yet, what if the stock market was a person? What kind of power would the personification of the stock market weld?

Chances are the stock market would be very much like fictionalized character Tony Stark.

Let’s break down just how they are similar.

At the end of the day, the stock market isn’t a singular form.

You have a mass of stock exchanges around the world.

And if you are a Marvel fan you know Tony Stank is an Avenger, the head of the Stark corporation, and the man in the red suit – Iron Man.

With him, you get all the drinking, narcissism, volatility, genius mentality, and ridiculous wealth with the occasional swooping in to save the day. A combo that can be your best friend or worst nightmare and fall anywhere in-between.

Now that we have put a fictional face to the stock market, we can finally ask — what the heck is going on?

Seriously the stock market has always had ups and downs, but it seems like lately, a storm is brewing.

We are in the middle of trade wars, supply shocks, debt up to the neck, an impeachment, an election, and not mention all the drama going on overseas.

There is more crazy going in the world than a bad reality show.

The lead up to 2020 has everyone sit at the edge of their seat, transfixed to see what happens next.

So how could you develop stock market thinking and become a proactive trader who navigates the market with ease?

Real Talk: The Actual Stock Market Thought Process

There is a lot to be said about human behavior. Despite the stock market being a thing of “nature” and not a person… the reality is it is made up of millions of people.

It is a smorgasbord of individuals. Each and every one of these people come with their own attitudes, views, drive, goals, values, forces, and emotions.

These factors combined have the power to influence the stock market giving it human-like behavior at times.

These behaviors are the direct result of people driving them.

Unable to accept a loss

Many people fall into the mindset of preparing for the worst rather than focusing on the good. They hold on tight to that loser stock rather than pulling the plug.

The result is they lose even more money! To put it in perspective it’s that one friend that is hanging to their awful relationship. They sit by thinking it will be like old times again someday.

This tends to happen with short sellers (something I rarely do with stock outright, options are a different story for bearish bets). Just take a look at TSLA recently.

Everyone and their brother wanted to short the stock due to the “weak” debut of its new truck. However, other traders had something else in mind… they bought TSLA into the event, and it just ramped higher.

Bandwagoning has a huge effect on the market

Traders see others jumping ship, so they decide to take a leap of fate too. They do this instead of seeing what the catalyst was that set it all off. It can result in dramatic drops in price or temporary spikes.

We see this with small-cap momentum stocks all the time. A massive spike… followed by a subsequent pullback. Sure, there is a plethora of opportunities in the small-cap market, but you need to use the right patterns.

Unrealistic belief control

Many traders believe that profits on their trades are due to their superior skills and control over their investments. This belief can lead to overconfident trading. When the reality is there is little you have complete control over with the stock market.

These overconfident traders are the equivalent to a toddler believing they have control of dinner when they shout “no!” The reality is they will eat what you made when they get hungry. Just like an experienced trader knows that a great setup will come, it can’t be forced, but it can be maximized.

That means if you want to be a successful trader, you must keep your ego in check. A few quick tips:

  • Develop a plan and stick to it.
  • Stop out once you’ve reached your stop loss, don’t keep adjusting your orders.
  • Keep your ego in check by reviewing your trades… you’ll notice a pattern of strategies that work and ones that don’t.

Taking the inch over the mile

There is the tendency to jump in and out a multitude of trades under the belief that you need a multitude of irons in the fire to make money. Instead, the trader gets pocket change rather than big profits. Quality over quantity.

For example, I’ve recently come up with a strategy that allows me to trade just one stock a week. It’s my highest-conviction trade idea… and it’s super simple.

Myside bias

This can be summed up easily. If a trader wants to believe a trade will be great, they will find a way to justify their belief. You can find anything if you look hard enough. Example: flat earthers.

It can be easy to think of the stock market as a wild unpredictable thing. To wish and hope it could tell you its secrets.

But there is always more than meets the eye. The stock market can be like Iron Man prior to the actual plot of the movie (hopefully not as drunk). Or the reality that is what its investors’ behaviors it to be.

If you want to prevent the market from pummeling you and start raking in profits consistently, then check this out.


Leave a Reply

Choose From The Topics Below To Receive Jason Bond’s Market Insights & Alerts: