Psychology of the market circle

2021년 11월 25일

Hello traders!
Euphoria and Anxiety, Fear and Greed
Psychology of the market cycle
Any trader finds himself under the influence of changing market cycles. At favorable moments, investors feel joy and are overwhelmed with self-confidence. On dark days, the investor falls into despair and feels anxiety attacks.
The only way not to succumb to such an emotional influence is to follow the clear rules of a properly compiled system. Unfortunately, most traders have no plan and no strategy. In order not to become a victim of emotions, a trader must have an idea of the emotional stages of the market cycle.

Psychological stages of trading
An uptrend is a trader's emotions.

Optimism
When the market is growing, the trader sees an opportunity to earn and invests money. The economy is growing, the price is rising, profits are growing. At such a moment, the trader feels confident, begins to open new positions after each pullback, which eventually turns into a kind of instinct. At this stage, the trader begins to forget about the risks.

Enthusiasm and Abundance
The market is starting to accelerate. Traders experience pleasant feelings of joy and enthusiasm. The trader begins to lose his head, confidence overwhelms him.

Euphoria
After that, the last stage of the upward trend comes - Euphoria. Money comes very easily, the trader is overwhelmed with confidence in his actions and decides to open positions using leverage. At some point, the trader begins to think that he is a professional analyst, and it is not he who is following the market, but the market is following him. This stage in the market helps large investors to discount their shares to self-confident traders who buy everything in a row, believing in the continuation of the upward trend. In fact, this phase is the most risky, after which the trend is reversed.

Emotional stages of a Downtrend in the market
Anxiety
The price is starting to slow down, there are fewer and fewer sellers, bears are gaining momentum. For a trader blinded by luck, this phase looks like another correction. But the market can no longer create new highs and falls, forming new lows. Such a fall creates anxiety in the trader's soul, easy profits begin to melt.

Denial and Fear
Fear fills the market, traders are afraid to be wrong, because recently they ruled the market. At this stage, the trader denies that he is wrong and tries in every way to justify holding unprofitable positions. Like any beginner, a trader believes that sooner or later the price will not only return, but also go beyond the maximum. Denial brings the trader to a state of helplessness and inaction, from misunderstanding of the situation on the market. The trader gets lost, not knowing what to do and waits without knowing what, without closing unprofitable positions.

Despair and Panic
The price continues to fall, and the trader falls into despair, because the confidence in holding a losing position is already beginning to disappear. This phase is the most painful, because the severity of losses presses too hard to stay calm.

Surrender
The unprofitability of the position is increasing, traders can no longer tolerate this pain. In this phase, traders have to capitulate just to stop these torments. Traders are starting to close positions and it is here that large companies are included, for which this moment gives a new opportunity for large profits. Asset buying begins, because a reversal is possible soon.

Despondency and Confusion
As it often happens, as soon as a trader has closed a position, the market begins to grow. It looks like the law of meanness. This phase drives the trader into despondency, because the position was closed a moment before the rise. It is here that newcomers begin to think about whether it is worth investing further.

Hope
The market is starting to revive. The price shows new highs and the investor has hope. It seems that here it is, a new opportunity. The trader begins to enter the market, forgetting about the past, without drawing conclusions. A trader enters the market when the price has already accelerated, at points where the risk is again close to a critical value, the cycle begins again.
Traders should keep this cycle in mind. Such emotional roller coasters can ruin anyone. A well-designed strategy can help avoid these painful blows.
Remember the risks, remember the cycles, work on the mistakes, and victory will not take long to wait.

Traders, if you liked this idea or if you have your own opinion about it, write in the comments. I will be glad 👩‍💻