The Tech Quiz - Season 39

What is narratives trading?

Source

According to my understanding, Narrative trading is an investment approach in which conventional technical or fundamental analysis is not used to guide decisions, but rather dominant stories, themes, or attitudes in the market. By keeping an eye on news stories, social media stories, and new trends, traders using this strategy can find investing opportunities that fit the narrative of the market.

In the world of cryptocurrencies, stories have a big impact on cryptocurrency values. To participate in narrative trading successfully, one must keep up with the most recent advancements and comprehend how they can affect the market. Actively keeping an eye on news sources, social media sites, and industry forums is part of this. Investors might position themselves to profit from subsequent market movements by spotting and purchasing assets that match emerging storylines early on.

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Which narrative can grow in the next year?

It is necessary to examine current trends and emerging themes in a variety of sectors to determine which market narratives might grow in the next year. The following are some stories that could develop:

• The first is machine learning and artificial intelligence (AI). As the AI industry grows, it is affecting sectors including healthcare, banking, and transportation. Leading companies in the provision of AI solutions include C3.ai Inc. Currently, C3.ai Inc. is trading at $25.67 per share as of October 21, 2024, a small reduction of 0.96%.

• Environmental, Social, and Governance (ESG) Investing ESG Investing Sustainable and responsible investing is becoming more and more important. ESG-focused funds and businesses that put social responsibility, environmental stewardship, and good governance first are drawing more attention from investors.

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What risks come with focusing too much on narratives in trading?

Traders or investors that place an excessive amount of emphasis on narratives run the following risks:

Speculation and Volatility

• Status or hype power narratives, which raise volatility. As the narrative is well-liked, prices can increase quickly, but as interest wanes, prices can decrease just as fast.
• Speculative bubbles can occur when investors believe a story without strong underlying support, which can ultimately result in price crashes.

Transient Trends

• Stories can be fleeting, so a popular trend one day might not be as relevant the next. Using short-term stories excessively can result in investments that are not well-timed.

• As narrative popularity rises, traders may enter at the peak and lose money as the trend falls. It is possible for narrative-driven trading to result in emotional investingwhen choices are made based on.

My invitees are: @entity01 and @ebeke

Thank you @malikusman1

Reference from here