If you ask, what is market psychology like? So I can express it in two words: FEAR , GREED. Fear comes from English which means fear, while greed means greed.
Before I talk too much about fear and greed, I would like to tell you that in the capital market, JCI movements and stock price movements will specifically occur in 4 CYCLE stages.
1. Stages of climbing. At this stage, the stock price is in a low position, and market participants are ready to accumulate shares to raise the price of certain shares, because the price is already low, it has been corrected. Usually at this stage, types of investors and smart traders (smart money), who can read stock price movements early, will enter first to buy.
2. Bullish stage. At this stage, because many market participants have accumulated, the stock price will be in an uptrend. And usually, retail investors who are not as good as smart money, they will only dare to enter when the stock is really bullish, like in this stage 2.
3. Saturation stage. Stock prices are unlikely to continue to rise. After the stock price rises to a certain point because it continues to be lifted, which means that technically the stock price is already high or overpriced (overbought), the stock price will tend to sideways and begin to see a short-term downtrend. Here, some market participants have begun to sell their shares.
4. Stages of correction. After the stock price reaches overbought, there is a take for profit or profit taking. This is done by market participants by selling their shares whose price is considered too high, causing the stock price to correct or temporarily fall. At the correction stage, the correction may be lower than the price when the stock was in stage 1, but it could also be that the correction price is still higher than the stock price at stage 1. Usually, if the stock is liquid, has good prospects, then even there is a correction but the stock price is still higher than the stock price in the cycle in stage 1.
The following 4 cycle stages that determine the psychology of the market.
Real application of 4 cycle stages on INDF stocks.
After going through this correction stage, the stock price will return to stage 1, and so on. That's why I say it's a cycle. However, for specific stocks, not all of them can implement the 4 stages, because there are many stocks that move sideways continuously, fried stocks whose ups and downs are unpredictable because they are illiquid, or even sleeping stocks that don't move at all.
These four cycle stages are the stages where market psychology actually occurs, namely FEAR and GREED. "Then, what do these stages have to do with fear and greed?" Ask you.
Of course very related. Market psychology can be explained through these stages. Then how can these stages cause a person to be greedy or otherwise afraid? Please read the next post: Market Psychology: Fear And Greed (Part I).
