The Triple Exponential Average (TRIX), commonly referred to as the TRIX trading indicator is a momentum oscillator that helps technical traders identify trend reversals, market conditions, and price fluctuations while filtering out insignificant price movements. Exponential moving averages are applied three times to the closing price, ensuring smoother price action and reducing false signals....
Trading psychology refers to the mental and emotional factors that influence a successful trader's decisions. It’s the silent force behind hesitation, overconfidence, fear and greed. In everyday life, it’s like ignoring a fire alarm because you think it's just a drill, only to discover it’s actually real. During severe bear markets, trading psychology is the biggest factor affecting trading...
Pessimism bias is a cognitive bias that causes traders to overestimate the likelihood of negative events while underestimating the likelihood of positive ones—a mindset often explored in trading psychology. It’s what makes someone believe the worst-case scenario is more probable than it actually is. Picture a friend who refuses to fly because they think every plane is bound to crash—even though...
The Ostrich Effect describes the tendency to avoid dangerous or negative information, as ostriches bury their heads in the sand to avoid danger. In everyday life, it’s like ignoring a bank account balance when you suspect you’ve overspent. This cognitive bias occurs when individuals prefer positivity bias and avoid negative information that contradicts their expectations—a pattern often explored...
Optimism bias is the tendency to believe that positive events are more likely for you than for others. It’s why people think they'll avoid traffic despite leaving late or assume a new business venture will succeed despite clear risks. Watch an experienced trader review their journal, and you'll often see a revealing pattern: wins are attributed to skill and careful analysis, while losses are...
The Bandwagon Effect is a powerful psychological bias that affects consumer behavior in ways they often don’t realize. Simply put, it’s the tendency to follow the crowd and believe that it must be right if many others are doing something. This cognitive bias comes naturally to humans due to our inherent need to be part of a group, leading to a herd mentality in financial markets. In the context...
In last week's update I warned of a break below 5500 on the S&P500 and a break below 19150 on the Nasdaq 100 being a critical point for an accelerated drop in the markets. We certainly saw that come true this week! In the S&P500 over the last two days we have seen two pretty large red candles with two pretty decent sized overnight gaps. This seemed pretty extreme to me, so I ran a quick...
The Ease of Movement (EOM) indicator is a volume-based oscillator that helps traders analyze the relationship between price movements and volume levels to determine how easily an asset moves in a given direction. This trading indicator highlights whether a price movement happens with light volume (indicating an easy move) or requires heavy volume to push through resistance. To understand this...
The Money Flow Index (MFI) is a momentum oscillator that evaluates buying pressure and selling rules by incorporating both price movements and volume of trades. Unlike the Relative Strength Index (RSI)—which relies solely on closing price—the MFI provides a broader view of market conditions and the direction of money flowing. Think of the MFI as a financial heartbeat monitor. Just as a doctor...
The Bullish Percent Index (BPI) is a trading indicator that measures the percentage of stocks exhibiting Point & Figure (P&F) Buy Signals. This valuable tool helps traders assess a market’s internal health, providing insights beyond just market movement and price fluctuations. A high BPI indicates that most stocks in an index are following bullish patterns, while a low BPI suggests broad...
The Gann Fan is a trading indicator developed by W.D. Gann, a legendary and 20th-century market theorist who believed that movements in price follow geometric angles. The fan consists of multiple angled lines drawn from a key price high or low, helping traders visualize trend reversals, support and resistance levels, trend direction, and potential price targets. Unlike traditional trend lines,...
Conservatism Bias in Trading is one of the most insidious cognitive biases that stock traders fall into. In simple terms, it’s the tendency to cling to old beliefs and underweight new evidence, even when that new information could dramatically improve investment decisions—a common trap explored in trading psychology. Research has shown that behavioral biases, including conservatism bias,...