From Emerging Trends Trader (AUSTRALIA)-
Why Risky Markets Are More Predictable
In today’s Emerging Trends Trader, I’ll attempt to answer two questions.
One, why are risky market conditions actually more predictable in nature? And two, how do our moods affect our investment returns? After that, I will cover the stock updates.
High risk means high predictability
To answer the first question, you need to know why prices move around in the first place.
Market prices move up and down due to trading activities. There are buyers and sellers in the market who transact on a daily basis. This changes the demand and supply for securities, leading to changes in prices.
The real question here is not the mechanics of demand and supply, but rather why people behave in such an uncoordinated way. Investors do not act in unison because everyone has a different set of circumstances. We all have distinct payoff expectations, risk tolerance levels, beliefs, strategies, timing, capital levels and many other distinguishing factors…