FoundationsMAD Academy0:44Psychology

The Worst Price Feels the Safest

Chasing happens because confidence peaks exactly when a move is most extended, which is also when the risk is largest.

0:44 · 6 scenes

This lesson is part of a MAD Academy plan.

What the Lesson Covers

  1. 0:00A stock feels safest to buy after it has already run. That is the trap.
  2. 0:05The inversion. Confidence rises with the price, while the distance to a sensible stop rises too.
  3. 0:14What it does to the trade. The stop is now far below, so the position must be tiny or the risk is large.
  4. 0:23Why the feeling is unreliable. Conviction is built from recent price action, which is exactly what already happened.
  5. 0:31The mechanism that fixes it. Set the alert at the level you would buy, before the move, and let it fire.
  6. 0:39Decide the price while it is still boring.
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Educational content only. MadStockAlerts provides market commentary, research, and educational content. It is not personalized investment advice, and nothing here is a recommendation to buy or sell any security. Trading and investing involve substantial risk, including loss of capital. See the Risk Disclosure and Customer Agreement.
Educational content only. MadStockAlerts provides market commentary, research, and educational content. It is not personalized investment advice, and nothing here is a recommendation to buy or sell any security. Trading and investing involve substantial risk, including loss of capital. See the Risk Disclosure and Customer Agreement.
The Worst Price Feels the Safest — MAD Academy Training Video · MadStockAlerts