The contrast effect is a cognitive bias where our perception of something is influenced by what came before it. Humans are particularly susceptible to this bias, especially when it comes to how we perceive stock prices and value. You would think a bottle of wine that...
The House Money Effect is a psychological bias where people treat money they’ve recently won (or earned easily) as less valuable than their original capital. This leads to riskier decisions like a gambler taking bigger bets after a hot streak. This cognitive bias,...
The Chaikin Money Flow (CMF) is a volume-based trading indicator developed by Marc Chaikin. It measures the volume of money flow into or out of a security over a given trading period, typically 21 trading days. The core principle behind CMF is that when closing prices...
The Woodie’s Pivot Points trading indicator is a set of calculated pivot point levels used by traders to identify potential support and resistance areas in the market. These types of pivot points help traders predict possible price reversals and breakouts by...
Hyperbolic discounting is one of the most powerful yet least understood psychological forces in trading. This cognitive bias leads investors to choose smaller, immediate gains over larger future rewards, fundamentally altering how they approach position management and...
Have you ever refused to sell a stock at a loss because you “knew” it would recover? Or hesitated to buy because the price seemed too high compared to a past level? That’s anchoring bias, and it’s one of the most dangerous traps in trading. It tricks you into making...
The Kelly Strategy, developed by John Kelly at Bell Laboratories, provides an optimal strategy for capital allocation in investment and gambling. It aims to maximize the logarithm of wealth over time, ensuring optimal growth rate while managing downside risk. The...
The Downside Tasuki Gap candlestick pattern is a bearish continuation pattern that suggests an existing bearish trend is likely to persist after a brief pause. Unlike reversal patterns that indicate trend exhaustion, the Downside Tasuki Gap signals that sellers remain...
The Upside Tasuki Gap candlestick pattern is a bullish candlestick continuation pattern that suggests an existing bullish trend is likely to continue after a brief pause. Unlike reversal patterns that indicate trend exhaustion, the Upside Tasuki Gap signals that...
The Mat Hold candlestick pattern is a continuation pattern that signals a brief pause in the trend before the momentum resumes in the same direction. Unlike many candlesticks patterns that indicate potential reversals, the Mat Hold pattern suggests that the dominant...