Dear readers, in this thread we're going to have a look to the market from it's psychological point of view.
Mass psychology in markets:
The markets, are a virtual place where a collectivity of entities meet each other and buy or sell contracts within themselves, as a collectivity, their ideas and feelings and emotions blend together creating what can be defined a crowd effect.
For example, sometime we can have an overall mass euphoria, price is going up, foundamentals are very bullish, everything seems to suggest that market can only go more up and the right thing to do is buy. These ideas are shared among the community, everybody agree that the market must and will go up, .
In this case, we would surely see a nice uptrend, this is what crowd psychology can create, trends.
Another example, a community with many dissenting views within itself, somebody think market is cheap and buy, as price goes up , somebody other think market is high and sell, there is not a strong idea shared among the community, market chop up and down, this is also what crowd psychology create, ranging periods.
A single trader cannot move the markets, only a community of traders can.
In today virtual markets the community is virtual, at any given time, the information shared among this community is the same for everyone (the various informations shared by the medias and agencies about the economies, the economic data, etc.), therefore their ideas are similar for the most part as everybody looks at the same information.
The problem with the financial markets is that they are traded by way more than one community, as the world is soo big that there are different time zones, and when the asian community sleep, the europeans and americans trade, then while the europeans sleeps, the americans and asians trade, etc.
Different communities, different ideas, different interests, this makes the financial markets tricky and unpredictables.
However, once we start to look at them from a multi-communities mass psychology perspective everything seems to make more sense, and the markets can be understood.
More to come
Mass psychology in markets:
The markets, are a virtual place where a collectivity of entities meet each other and buy or sell contracts within themselves, as a collectivity, their ideas and feelings and emotions blend together creating what can be defined a crowd effect.
For example, sometime we can have an overall mass euphoria, price is going up, foundamentals are very bullish, everything seems to suggest that market can only go more up and the right thing to do is buy. These ideas are shared among the community, everybody agree that the market must and will go up, .
In this case, we would surely see a nice uptrend, this is what crowd psychology can create, trends.
Another example, a community with many dissenting views within itself, somebody think market is cheap and buy, as price goes up , somebody other think market is high and sell, there is not a strong idea shared among the community, market chop up and down, this is also what crowd psychology create, ranging periods.
A single trader cannot move the markets, only a community of traders can.
In today virtual markets the community is virtual, at any given time, the information shared among this community is the same for everyone (the various informations shared by the medias and agencies about the economies, the economic data, etc.), therefore their ideas are similar for the most part as everybody looks at the same information.
The problem with the financial markets is that they are traded by way more than one community, as the world is soo big that there are different time zones, and when the asian community sleep, the europeans and americans trade, then while the europeans sleeps, the americans and asians trade, etc.
Different communities, different ideas, different interests, this makes the financial markets tricky and unpredictables.
However, once we start to look at them from a multi-communities mass psychology perspective everything seems to make more sense, and the markets can be understood.
More to come