How to use COMMON SENSE ?
SGX/RHB 2015 Malaysia trip (part 3: Johor) This is the 3rd part of my Malaysia trip to help SGX promote their Indices products, which is also my main trading instrument. You can catch up first by reading:
"Trading Edge" (16AUG), and "Learning from history" (11SEP)
I had a decent Johor crowd too, attentive right to the end.
This is definitely a "happier" crowd (because the market is UP), compared to 2 months ago when I was in Malacca/Subang, facing a group of "sad crowd" (because market then was DOWN).
By contrasting the 2 months' emotional feelings, it is so easy for me to illustrate to my audience how to use "Common Sense". I personally believe that most answers to any complex problems are already available to us "within" our Common Sense, and we all have access to this solution source. But then, do you also know (or agree), that Common Sense is actually "not very common" ? This is where I think I can help my audience understand, with this simple Mathematical equation: Common Sense is inversly proportional to Emotions You see, when Emotions are High, Common Sense would be Low; and conversly, when Emotions are Low, that's when Common Sense can be HIGH (or activated). So, the simple solution to tap on your Common Sense is: to keep check of your Emotions, and maintain it LOW !!!
Let me repeat this chart, to show you the market condition during mid-AUG when I visited Malacca/Subang. Assuming you already understood my Emotion Lines, the Mass Psychology of the market then is displaying intense Fear, going to develop anytime into PANIC. Hence, Emotions are HIGH (feeling very very sad), and therefore most peoples' Common Sense would be LOW, and cannot make rational decisions.
Let me also repeat this chart, to show the climax bottom, starting on Monday night (24AUG) Following procedure, professional traders would look out for Climax Bottom from the market through watching out signals (when EmotionLines are in PANIC mode), which came on the 24AUG (Hourly Hammers formed), with further confirmation by the end of that week, when Weekly Hammers are formed too (shortly after I left Malacca/Subang)
This is what I showed my students on 16OCT on our FaceBook. From AUG panic low till now, market emotions have been "stabilizing", and as of 1 week ago, Daily EmotionLines started to squeeze and turned GREED. Greed EmotionLines are "not wide" yet, so market is still "sensible". Have you bought already (since the climax low from 24AUG)? If you have not, please remember my "equation", and when market emotions turn "really high", that's when she will be doing all the "wrong" things again. And as for you, can you maintain emotions low, and do "what is right" ?
My theme for this article is summarized here. Know thy self & know thy enemies ... and start to take note of market sentiments change, while being aware of yours. Most of our indicators, are created to understand these emotions, and suggest the right course of action to take. To find out more, proceed to read our other blogs.
After the seminar, it's time for lunch...