Market Psychology simplified
Carrying on the Simsons theme - In the last couple of months, I have written several educational posts & have been lucky enough to see some being selected as "editor picks" After writing some more serious ones, I wanted to write some other posts to have a laugh.
I had some great comments, replies, and requests on the back of the first Bart one. Actually enjoyed the art side of it more than I expected.
Back in February, I posted a post about market psychology.
With feedback from Bart and some requests on psychology, I thought I would write a post using the "Simpsons" to explain the phases. So you have a little daft fun, with a topic worth covering from a technical perspective.
Phase one
Phase one is Hope we hope we are correct in our analysis, we hope that the market goes in our favour, we hope for moon shots and Lambo's. Think of hope and we think of words like aspiration, desire, wish, expectation, ambition & dream. Hope is what we are feeling before a trade is placed.
Phase 2
As a trader, we feel optimistic as the trade goes in our favour, we get excited and dream of the possibilities. What if this goes all the way, what if this account makes me! Bragging rights, money banked - Life doesn't get much better. We can start to relax and unwind and get ourselves into a good place, mentally.
Phase 3
Belief - at this stage, nothing could go wrong... Well, we hope and maybe pray for. Trading, things never really play out to plan. We see crazy swings in our favour and wild pullbacks. (often enough to give us heart attacks) So we listen to chilled music, we talk to ourselves & we say a silent little prayer that this is the one! My analysis was correct, I am quietly optimistic about this trade, Lambo - here we come, just a little further.
Phase Four
Thrill!!! What else is there? At this stage, we are winning in life. Now we are picking the colour of the Lambo. Nothing can hurt us now. In trading terms, this is where life often comes to kick us in the ass! But who cares, we are on top of the world!!!
Bitcoin is going to the moon - I bought at $59,000 it's now at 61k I can't lose...
The fifth phase
Complacency - now back enjoying the beer, we got some great paper gains and we will never see 50k again. Death to Dollar, Rise to Bitcoin and all that! Let's chillout.
Phase 6
As the Pullback comes - we start to get a little anxious, will it go below my entry? What? it can't go there, no way. I am an early adopter, I was in and now it's not continuing up???? What the hellllllllll. I can't sleep, I don't want to eat, I'll just take a triple Espresso with a splash of Red Bull.
The 7th Phase
Denial - This can't be a trend change? It must be an aggressive pullback. Why is it going so low? I don't believe it, I only have 30X leverage on my trade. I'll hold out, it will hit $1 Million a Bitcoin by the end of the week. We hold and hope! Until the leverage gives a margin call...
Phase 8
Panic! Pure PANIC Bitcoin falling through my $56,000 floor. I'm 30x Leveraged, please don't drop, please don't. How will I tell the wife I used the kids as collateral? I have to sell out, I can't take another red candle.
Maybe the little sprite is toying with me!
Phase 9
Why you little.... Yes, Anger sets in. You are out at a healthy loss. It's gone and beat you. Blasted crypto! Must be a scam! I already put a deposit on my pink Lambo. Told the Mrs she could have that diamond ring on Friday. Now what?!>?!
The 10th phase
Watching Bitcoin move on up, beyond 60, up through 70, into the hundreds. You feel depressed. Trading might not be for you, Bitcoin was a scam. The US government played me. Where next? Work on Monday, How do I tell the wife about the diamond? How do I explain to the Lambo dealer I'd like my deposit back. "Doh, it's a deposit. I've last that as well!"
Bitcoin was just an analogy here - these phases happen over and over again. Nothing new, they will repeat themselves over and over again. To visualise this on a chart, you need to go to the psychology post linked below. To go deeper into this, It's worth reading "Trading in the zone".
Hope you liked the images and content!
Disclaimer
This idea does not constitute as financial advice. It is for educational purposes only, our principle trader has over 20 years’ experience in stocks, ETF’s, and Forex. Hence each trade setup might have different hold times, entry or exit conditions, and will vary from the post/idea shared here. You can use the information from this post to make your own trading plan for the instrument discussed. Trading carries a risk; a high percentage of retail traders lose money. Please keep this in mind when entering any trade. Stay safe.
Carrying on the Simsons theme - In the last couple of months, I have written several educational posts & have been lucky enough to see some being selected as "editor picks" After writing some more serious ones, I wanted to write some other posts to have a laugh.
I had some great comments, replies, and requests on the back of the first Bart one. Actually enjoyed the art side of it more than I expected.
Back in February, I posted a post about market psychology.
With feedback from Bart and some requests on psychology, I thought I would write a post using the "Simpsons" to explain the phases. So you have a little daft fun, with a topic worth covering from a technical perspective.
Phase one
Phase one is Hope we hope we are correct in our analysis, we hope that the market goes in our favour, we hope for moon shots and Lambo's. Think of hope and we think of words like aspiration, desire, wish, expectation, ambition & dream. Hope is what we are feeling before a trade is placed.
Phase 2
As a trader, we feel optimistic as the trade goes in our favour, we get excited and dream of the possibilities. What if this goes all the way, what if this account makes me! Bragging rights, money banked - Life doesn't get much better. We can start to relax and unwind and get ourselves into a good place, mentally.
Phase 3
Belief - at this stage, nothing could go wrong... Well, we hope and maybe pray for. Trading, things never really play out to plan. We see crazy swings in our favour and wild pullbacks. (often enough to give us heart attacks) So we listen to chilled music, we talk to ourselves & we say a silent little prayer that this is the one! My analysis was correct, I am quietly optimistic about this trade, Lambo - here we come, just a little further.
Phase Four
Thrill!!! What else is there? At this stage, we are winning in life. Now we are picking the colour of the Lambo. Nothing can hurt us now. In trading terms, this is where life often comes to kick us in the ass! But who cares, we are on top of the world!!!
Bitcoin is going to the moon - I bought at $59,000 it's now at 61k I can't lose...
The fifth phase
Complacency - now back enjoying the beer, we got some great paper gains and we will never see 50k again. Death to Dollar, Rise to Bitcoin and all that! Let's chillout.
Phase 6
As the Pullback comes - we start to get a little anxious, will it go below my entry? What? it can't go there, no way. I am an early adopter, I was in and now it's not continuing up???? What the hellllllllll. I can't sleep, I don't want to eat, I'll just take a triple Espresso with a splash of Red Bull.
The 7th Phase
Denial - This can't be a trend change? It must be an aggressive pullback. Why is it going so low? I don't believe it, I only have 30X leverage on my trade. I'll hold out, it will hit $1 Million a Bitcoin by the end of the week. We hold and hope! Until the leverage gives a margin call...
Phase 8
Panic! Pure PANIC Bitcoin falling through my $56,000 floor. I'm 30x Leveraged, please don't drop, please don't. How will I tell the wife I used the kids as collateral? I have to sell out, I can't take another red candle.
Maybe the little sprite is toying with me!
Phase 9
Why you little.... Yes, Anger sets in. You are out at a healthy loss. It's gone and beat you. Blasted crypto! Must be a scam! I already put a deposit on my pink Lambo. Told the Mrs she could have that diamond ring on Friday. Now what?!>?!
The 10th phase
Watching Bitcoin move on up, beyond 60, up through 70, into the hundreds. You feel depressed. Trading might not be for you, Bitcoin was a scam. The US government played me. Where next? Work on Monday, How do I tell the wife about the diamond? How do I explain to the Lambo dealer I'd like my deposit back. "Doh, it's a deposit. I've last that as well!"
Bitcoin was just an analogy here - these phases happen over and over again. Nothing new, they will repeat themselves over and over again. To visualise this on a chart, you need to go to the psychology post linked below. To go deeper into this, It's worth reading "Trading in the zone".
Hope you liked the images and content!
Disclaimer
This idea does not constitute as financial advice. It is for educational purposes only, our principle trader has over 20 years’ experience in stocks, ETF’s, and Forex. Hence each trade setup might have different hold times, entry or exit conditions, and will vary from the post/idea shared here. You can use the information from this post to make your own trading plan for the instrument discussed. Trading carries a risk; a high percentage of retail traders lose money. Please keep this in mind when entering any trade. Stay safe.
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