Here’s how the psychological terms that technicians employ to describe the markets are transformed into technical tools. It is possible to transform psychology from a subjective interpretation into an objective tool. By creating a psychological matrix, we can define emotion so that you never think of fear and greed in quite the same way again. Accurate conceptualization and logical construction of the matrix allows a trader to develop a market edge. In addition, because the trader has a good understanding of each phase of the market as it unfolds, he or she is able to approach trading from a more reasoned perspective. A market edge must be based on the accurate understanding of the difference between statistics and knowledge. Statistics represent numerical data assembled and classified so as to present significant information, while knowledge, for the purposes of the psychological matrix builder, is defined as the ownership of valuable information and the ability to correctly analyze and use it. In this respect, statistics will serve as our mile-stones, and the observation of psychological traits of humans, combined with statistical measurement, will provide the knowledge we need to build a road map of the markets. By observing how people react to market stimuli, a trader gains knowledge to lead and define statistical action. Of key importance is that this is the difference between describing what has occurred on the left side of the chart and accurately assessing what may happen on the right. |
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