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Trading Psychology

Psychology plays a large role in both short and long term price movements of any type of asset. There are a few different approaches to analyzing psychology, all of which are effective in different ways. Two of the most popular methods revolve around trading the news and candlestick charting. Trading psychology is very important if only for the reason that so many people give it credit. In this regard, it is a type of self-fulfilling prophecy. It works because people expect it to work. Regardless of why it works, having a good feel for trading psychology can propel your trading to the next level. This is especially true when you are trading binary options.

Trading the news requires a bit of anticipation. You need to have the general feel of the release as soon as possible, and put yourself in a good position right away. This can be tough, but there are many resources out there that will list when companies and government organizations are going to release pertinent information. Having a newsfeed sent to your computer can be very helpful here. Basically, when it comes to market psychology, the news is not as important as how people will react to it. For example, when a company posts earnings, but the earnings are not as high as was expected, the price of the stock tends to go down—even though the company is still making a big profit. Look at Apple’s current situation. Binary options can be very profitable when you trade the news because even little adjustments in an asset’s price can return big profits.

Candlestick charts were invented centuries ago in Japan in order to track the price of rice. What speculators found was that certain things tended to happen over and over again after certain chart patterns occurred. What ended up happening is that this knowledge became widespread, and now these occurrences keep repeating because they always have. People know, for example, when a spinning top occurs, traders know that trying to identify a trend is going to be difficult. A spinning top indicates that prices over the given period of time didn’t move much in either direction. This has been purported as a fact for so long, that people act the same way when the spinning top happens repeatedly. There are also patterns out there that point to continuous up trends, down trends, and both sorts of price reversals. Candlesticks are especially important for the short term binary options trader because they can identify when an ongoing trend is about to end.

Traders MindBinary options are a very good place to use trading psychology. Even when you trade 60 second binary options, big institutional traders are examining all sorts of angles. Still, the people that make the buy and sell decisions are looking at psychological factors as part of their decision making process. Having a good handle on what people are thinking can help you to better act like these professionals and can help you to mimic the success that they will have. Humans fuel price changes, even if it is the major banks that input the money.

Market psychology is an important part of every trader’s method of analysis. After all, markets are entirely dependent upon human action. Even if a company is looking very strong, the price of the stock will not move if people do not fuel an increase in demand. This happens on all timeframes and for all classes of assets. Humans make the market move, so having a firm grasp on what your fellow traders are thinking is going to help you quite a bit over the long run.

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