It is quite fascinating how we think and make decisions in our undertakings. We tend to surround ourselves with information that suits our beliefs because our rational judgment is not only influenced by emotions and passions, but it is subject to innate biases such as overconfidence. This results in a predilection for people whose mindsets and beliefs are in sync with ours (Montier, 2017). Based on this, we get drawn to these people as we establish ties with them thereby detaching ourselves from anything that seems to threaten our world views because we feel secure getting surrounded by people who confirm to us what we already think (Barber, 2015). That aspect is called confirmation bias and is equated to frequency illusion which explains the situation where someone acquires or buys something and suddenly realizes that it is ubiquitous since everyone else has the same product. It is a passive kind of experience as our minds try to cognize information related to us despite the actual increase in the frequency of similar incidences.
Humans incorrectly predict odds based on past experiences. This explains why humans are proven as illogical beings because difficulties arise when we place too much emphasis on past events. We complicate our minds on how the world works thinking past happening will alter the results in future. We also tend to worry about the things we have already lost (Barber, 2015). This is explained by the sunk cost fallacy. Sunk cost refers to any cost incurred not just monetary, but also the effort and time employed while working on something yet cannot be retrieved. Humans are not willing to ignore the costs even if they have already suffered it because they are wired to feel the impact more strongly the gain.
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In handling assets, traders, speculators, or investors focus on profitability and this is necessitated by both technical and fundamental analysis techniques. Therefore, in traversing and identifying market for supplies, commodity trading indicators get involved. They include Moving Averages (MA), Moving Average Convergence Divergence (MACD), Relative Strength Index (RSI), and Stochastic (Kirkpatrick II & Dahlquist, 2010). These technical analysis instruments aid traders in studying the market shifts because they are appropriate for making short term judgments since they analyze past price patterns, the volume, and trends used in the construction of charts applicable in shaping the future movement.
Moving Averages indicate the average commodity/stock prices over a specified trading period. For instance, a six-period MA will be the average of all the closing costs for the last five days inclusive of the current period. Moving Average Convergence Divergence refers to the trend which accompanies momentum indicator that applies moving averages and exponential moving averages in calculations to generate the signal line for distinguishing bull and bear indicators (Kirkpatrick II & Dahlquist, 2010). Notably, RSI is a momentum indicator which tries to determine the oversold and the overbought levels in a standardized market scale ranging from 0-100, thus, signifying if the market is on top or at the bottom. Stochastic is a technical aspect which explains how a price uptrend during the day will eventually drop near the upper end of the current price range. With this in mind, I recommend the importance of analyzing the changes in consumer behaviors, business entities, and other key participants in the market based on an observation on entry analysis, consumer feedback, and opinions on content posts.
References
Barber, P. J. (2015). Applied cognitive psychology: An information-processing framework . Routledge.
Kirkpatrick II, C. D., & Dahlquist, J. A. (2010). Technical analysis: the complete resource for financial market technicians . FT press.
Montier, J. (2017). Behavioural Finance: Insights Into .
