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Obvious trades are not always bad
Markets are extremely efficient, most of the time, and there is no edge in putting on an obvious trade that is fully understood and priced in by the market. On the other hand, the market is not an instantaneous discounting mechanism. There are a few reasons why markets don’t immediately discount all new information. 1. Confirmation bias. Old narratives die hard. Traders and investors that have made money on a prior narrative tend to be slow to abandon that narrative as new information arrives. 2. Financial market prices are mostly continuous. When news comes out, price doesn’t just jump to a new, correct level ... (full story)
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- Posted: Jan 23, 2023 7:40pm
- Submitted by:Category: Educational NewsComments: 0 / Views: 383
