Effective stock trading: a look at the state of mind of investors
The stock market is a trend-driven phenomenon. You can adopt three trends or routes. It is bullish or bearish or range bound. A bull market is one in which stock prices are rising, while a bear market is one in which stock prices are falling. More specifically, a bear market is when stock prices fall for an extended period, typically by twenty percent or more, while a bull market is when stock prices rise for an extended period, typically by twenty percent. percent or more. . The terms bull and bear can also describe investors. Investors who are positive about the future of the market are known as bull investors or “bulls”, and investors who are negative about the future of the stock market are called bear investors or “bears”. A range bound market does not have a defined up or down trend and tends to move within a relatively tight range over a certain period of time.
In general, there are four types of investors in a stock market; we can classify them as bull, bear, pig and sheep. A bullish investor is one who is optimistic about the future of the market. A bull investor anticipates a bull market and intelligently buys the security in the hope of selling it later at a higher price. A bearish investor is one who is pessimistic about the future of the stock market. A bear investor anticipates a market decline and tactfully sells the security in the hope of buying it back at a lower price. Bulls/Bears make money on their correct moves. A pig investor only thinks of quick returns, blindly and capriciously. A sheep investor behaves awkwardly out of fear or panic and shows a lack of initiative. Pigs/sheep often lose their money in a market. It is interesting to note that a bull or bear can become a victim of pig/sheep trends due to the crash or chaos in the market.
Pigs are described as greedy individuals. They are unable to understand the sentiments, technical aspects and fundamentals of the market. They are tempted to buy stocks that they cannot afford due to their greed to make a quick buck. So if there is volatility in the price, which happens very often, they panic and make bad decisions. That’s why they lose in the end. But if their bet is correct, the stocks they buy perform better. They will show an excessive tendency to wait until the price reaches the maximum possible height and will often end up falling off the cliff. They plan their investment moves rationally at first, but greed overcomes reason and blurs their decisions and plans. In the end, they fall into the trap designed by the clever market gurus.
Sheep are described as fearful/undisciplined individuals, so they are blind followers of successful investors without knowing the real basis of their success. They have no decision making power. They just follow the investment advice. But one thing is true; The stock market is a highly competitive field. People don’t give away effective investment advice. The real tips are not revealed, and the ones that are revealed are lousy. Therefore, tip-shy investors are also killed. They always enter the trend late and when smart investors are exiting. So, only they go down the slide.