Читать книгу Profiting from Weekly Options - Seifert Robert J. - Страница 15

Six famous markets have been examined. The time frame stretches for almost 300 years. Four of these markets resulted in bubble tops, one ended in an implosive bottom, and one is not a final score. Various reasons were given in order to justify the price action. Various underlying assets were involved in the bubbles.

Can we find a common thread?

● At market extremes, emotions drive the markets, not rational thought!

When the markets were rallying, it was not the value of the underlying asset that drove the market higher; it was the mind-set of the investors.

● Investors become overwhelmed by greed.

When it seemed that anyone could get rich in the South Sea Company, no one wanted to miss that ship.

● Investors become paralyzed by fear.

In the case of the implosion after the 2001 terrorist attacks, fear drove investors to unload their stocks in a hurry.

● All market extremes are driven by two forces – fear and greed.

Markets might generally pay attention to asset value, earnings, and global trends, but when emotion starts driving price, it can take over in a hurry.

You might be wondering why a book on how to trade weekly options would start with a chapter about economic history. I believe in order to be successful trading in the markets, you must be able to understand how the price got to certain levels and how to control your emotions when everyone around you is losing control of theirs.

Without an understanding of market psychology, it is almost impossible to be successful. You have to know what the other side of the trade is thinking and how they are reacting.

After each chapter, there will a brief quiz. Take it and check your responses in the answer section in the back of the book. The questions will be multiple choice, and the number of points you can earn on a question will vary from one to three. If you can score 90 percent on any of the tests, you are ready to go to the next chapter. If you struggle with the quiz, please reread the material before going to the next section. This book is a building-block system to approaching the markets, and, therefore, if you don't build a solid foundation, the whole structure can come crumbling down.