If you've been trading for a while, you've probably come across the Shooting Star pattern. It’s one of the simplest trading strategies to spot potential reversals, yet many get caught in false signals. This pattern can signal that an uptrend is running out of steam, but like any trading tool, it needs context and confirmation. This guide breaks down the Shooting Star pattern, how to identify it,...
Gambler’s Fallacy is the belief that past events influence future probabilities in random processes. Imagine flipping a coin five times and getting heads each time. After five consecutive heads, many assume tails are “due,” even though the probability remains 50/50. This deceptive psychological bias leads us to believe that random market events are somehow interconnected—a classic misconception...
Herd mentality is the natural human tendency to follow the crowd. It’s why people rush to buy the latest gadget, why traffic slows down to stare at an accident, and why trends explode overnight. This psychological effect helps people feel secure in their choices and is a well-known phenomenon in trading psychology. I mean, if everyone else is doing it, it must be right… right? When GameStop's...
Most traders spend years searching for the perfect system—but what if the real key to success isn’t about finding the “right” strategy, but asking the right questions? This week, we’re diving deep into the mindset shifts that separate struggling traders from consistent winners, the biggest cognitive biases holding traders back, and a game-changing trading formula that can help you build a...
The Hanging Man candlestick pattern is one that catches many traders' attention. It is a technical analysis tool that shows up at the end of an uptrend and might signal a potential reversal. But like any pattern, it’s not foolproof. Traders who blindly rely on it without context or confirmation often get caught on the wrong side of the market. If you’ve ever seen this pattern and wondered,...
Have you ever held onto a stock simply because of the previous price you initially paid for it? Or hesitated to buy because a stock seemed "expensive" relative to a past price level? If so, you've experienced anchoring bias in trading in your everyday life. Anchoring bias occurs when traders rely too heavily on an initial anchor, like their entry price, to make financial decisions, even when...
When a strong uptrend starts losing momentum, traders look for signals that indicate a potential trend reversal. One of the most reliable bearish candlestick patterns for this purpose is the Bearish Abandoned Baby. It warns that buying pressure has faded and sellers are taking control. This pattern often appears after a prolonged uptrend and suggests a reversal of a bullish trend. While the...
What is Anchoring and Adjustment in Trading?Have you ever bought a stock and fixated on the initial stock price you paid, refusing to sell until it returns to that level, even when the market condition is telling you to get out? That's what we call Anchoring and Adjustment Bias, and it's one of the sneakiest trading psychology traps in trading that relates to everyday decisions. This mental...
The Evening Star candlestick pattern is often regarded as a reliable indicator of potential trend reversals in the financial markets. Frequently used by technical traders, this three-candle formation signals a shift from bullish momentum to bearish sentiment, often marking the early stages of a downtrend. Understanding this pattern is useful for traders seeking to identify high-probability...
When price trends are up, traders watch for signs that the momentum might be fading. The Three Black Crows candlestick pattern is one of those chart patterns that signals a shift in sentiment. It suggests that bearish sentiment is building, and a potential price reversal could be near. But before making any trading decisions, it’s important to understand what this pattern really means and how to...
The advance-decline line is a market breadth trading indicator that gives traders insight into the overall health of stock markets by comparing the number of stocks advancing in price versus those that are declining. It’s essentially a tool for traders to understand market participation—whether movements are supported by the majority of stocks or just a few. Think of the A/D Line as the pulse of...
Stock traders often pride themselves on logic and analysis. Yet, even the most data-driven investors fall victim to trading psychology traps, one of the most subtle being ambiguity aversion. This cognitive bias leads to avoiding uncertain situations, even when they may offer better rewards. Imagine you’re in a new city, looking for a restaurant. You see one packed with people and another nearly...