Paradox in trading – #AnirudhSethi

A trading paradox is a situation in which the behavior of market participants or the market itself contradicts established market theory or conventional wisdom. One example of a trading paradox is the “Efficient Market Hypothesis” (EMH) which states that financial markets are always perfectly efficient and that it is impossible to consistently achieve higher returns than the overall market. However, there are traders and investors who are able to consistently achieve higher returns than the overall market, which contradicts the EMH. Another example is the “Paradox of Thrift” which states that saving more in a recession can lead to a decrease in economic activity and worsen the recession.

European equity close: ECB sources keep gains on track

The euro fell and European stocks gained further (though later gave much of it back) on an ‘ECB sources’ report suggesting that after 50 bps in Feb, the ECB will slow to 25 bps.

  • Stoxx 600 +0.3%
  • German Dax +0.3%
  • France’s CAC +0.4%
  • UK’s FTSE 100 -0.2%
  • Spain’s Ibex +0.1%
  • Italy’s FTSE MIB +0.2%

It’s been one of the strongest ever starts to a year for European stocks and the FTSE 100 continues to flirt with an all-time high. Portfolio managers have been buying Europe on relative valuation.

The Dark Side of Our Trading Psychology – #AnirudhSethi

The dark side of trading psychology refers to the negative emotions, thoughts, and behaviors that can arise during the trading process. These can include:

  • Fear and greed: Fear of losing money and greed for profits can lead traders to make impulsive and irrational decisions.
  • Overconfidence: Believing one’s abilities or predictions are more accurate than they actually are can lead to overestimating the success of a trade and taking on excessive risk.
  • Emotional attachment: Becoming emotionally attached to a trade, whether it is a stock, commodity, or currency, can cloud judgment and lead to poor decision making.
  • Self-sabotage: Self-sabotage can manifest in many ways, such as procrastinating on important decisions, not sticking to a trading plan, or taking unnecessary risks.
  • Behavioral biases: Behavioral biases, such as confirmation bias, herding behavior, and the sunk-cost fallacy, can lead to irrational decision making.

To avoid the dark side of trading psychology, traders can adopt various strategies, such as setting clear goals, using a risk management plan, diversifying their portfolio, and seeking out the opinion of other traders they trust. Additionally, traders can also use a variety of tools, such as decision-making frameworks, checklists, and mental models to improve their decision-making process and avoid succumbing to cognitive biases.

It’s important to acknowledge that trading psychology is a complex and multifaceted field and it’s hard to predict how one will act under certain circumstances. It’s important to be aware of your own biases, emotions, and weaknesses and to be prepared to deal with them.

OPEC secretary general says too early to tell impact of sanctions on Russian oil

  • China re-opening expected to encourage oil demand this year
  • Expects Chinese appetite to raise oil demand by 0.5 mil bpd
  • Demand from China, India could compensate for drop from developed countries

There are still mixed views on the oil market as of late but price has recovered well after the start of the year scare, with WTI crude now hovering back close to $80.

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