Since ancient times, people looked upward and observed that patterns in the sky change over time. Just imagine for a moment the time it took to accumulate that shared knowledge, which foretold the movements of the heavenly bodies.
Ancient seafarers used the lights in the sky to chart their course, as their movements through the seasons were as predicable as the tides.
Have you stopped to consider that human sentiment is a type of receding and ascending tide with predicable and repeating movements? And, when a quality or action is predicable, there is money to be made for those who understand the patterns as they unfold in a rhythmic fashion.
For investors, many have sought predictive powers, and they have been there all along. But computational power has changed the investing landscape in the past 25 years. When most people picture the U.S. Stock Exchange, they envision lots of people emoting. Some are sad, and some are jubilant. One has the crushed look of a jilted lover, another the countenance of one enraptured with delight.
That’s what we see from the outside. But underneath all that collective emotion is a priceless commodity: Predictability. Since the beginning of human history, people have sought to predict what others will do. Understanding and tracking sentiment is key to unraveling the mystery of stock movements and what the next shift will be.
Today, using mathematical analysis, one can predict the moods of the marketplace. One can observe the emotional roller coaster from a mindful perspective. And that is how an investor makes money: By analyzing waves of emotion and turning those collective bits of data into patterns that give insight into future stock-buying behavior. Voila! A secret of stock trading is revealed, but many will not heed it, and that’s something you can bet on, because emotions drive the majority of investors.