Also read the previous post: Stock Market Psychology: Four Important Stages
In the first stage, namely during the climbing stage, market participants will be "haunted" by a sense of hesitation to enter the market. At this stage, there will be many market participants who are doubting whether I should accumulate or not. If I accumulate fear that the stock will go down, but if I don't immediately place a buy position, the stock will go up. It is this feeling of fear and doubt that ultimately greatly affects the psychology and rationality of an investor.
In the bullish stage, when stock prices go up fast, and stock prices continue to rise at a certain stage, market participants will be faced with a situation of euphoria, feeling happy, unable to sleep, happy which in the end will bring you at the beginning of feeling greedy. . To make it easier I give an illustration.
Si Badu bought TLKM shares at a low price of IDR 3,200. Badu set a take profit at a price of IDR 3,350. And sure enough, TLKM's stock rose steadily to Rp3,350, and Badu should have taken profit. But because he saw the TLKM chart which was in a bullish trend, Badu began to consider in his heart: "Wow, TLKM keeps going up, just wait, maybe it can go up faster, later so the money can be bigger. Hihihi".
Well, this is where greed begins to emerge: a feeling of greed that begins with a sense of hope. Your disciplined faith is being put to the test: Can you stick to your own trading plan or not? When the market is bullish, that's what happens in general, greed. It's already profitable, it's time to take profit but I don't want to take profit, instead I expect the stock price to rise higher
At the saturation stage, the greedy nature of market participants peaks. The stock price is increasing at a certain resistance price point, but it is almost certain that the stock price will not rise as fast as when it is still in the bullish stage. At this stage, market participants have begun to reduce their buying actions because the stock price is considered too high, but there are still many market participants who hold their shares, still expecting the stock price to rise again. At this stage also the feeling of anxiety is getting bigger: Between holding or immediately profit taking. Even if your trading plan says it's time for profit taking.
Stock prices that have gone up too high will eventually be corrected. In the capital market there is no such thing as a stock that goes up and never goes down. In the last stage, namely the correction stage, the stock price, which was originally high, began to decline. This is where the taste of GREED turns into FEAR.
We use the illustration of Si Badu earlier. Si Badu bought TLKM shares at a price of Rp3,200, it was time to take profit, but Badu could not be disciplined with his own trading plan, Badu should have set a take profit at Rp3,250 instead expecting the price to rise. It turns out that the price of TLKM's shares which initially rose to, say Rp3,405, fell to Rp3,340. Badu got scared and thought:
"Wow, why is the price going down. Wait a minute. Maybe later the price will go up again, the profit can come back again." Here it is seen that Badu is starting to get scared (restless).
In fact, TLKM even fell again by Rp3,150. This means that Badu actually suffers a loss from what Badu should have previously made a profit. Badu began to worry and regret:
"Why didn't I sell TLKM before. Now it's even about the shares." Badu keeps thinking about the stuck stock and Badu is afraid that the stock will fall again. Finally, overshadowed by feelings of fear, Badu made a cut loss.
Feelings of fear will always overshadow market participants, especially when the index is experiencing a correction. It is not even possible if a stock experiences a deep decline, it can trigger panic selling. The act of panic selling is also a feeling of fear.
And you need to know, Fear and Greed are two conditions where both will always, and will definitely be 100% repeated. So, market psychology, both forex and stocks, can be explained through these two conditions: FEAR AND GREED, which can also be studied or explained through these 4 stages.
So if I may summarize the two conditions, when the stock market is hit by a feeling of FEAR, then these are the things that happen:
- Not confident
- Panic
- Worried
- Anxious
- restless
- Mental fall
On the other hand, when the stock market is hit by a feeling of GREED in a bull market, these are the things that happen:
- Euphoria
- Excess pleasure
- Sense of hope
- Overconfident
- Desire to continue buying shares
- restless
The psychology of the stock market will be explained through these things, in a bullish market condition and a bearish market condition. Then what about the psychology of the city? Please read the next post: Market Psychology: Fear And Greed (Part II) --> Market Maker Psychology.
