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Old August 7th, 2017, 07:40 AM   #1
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Market Psychology

Stocks going up and down is the result of supply and demand. Demand is people wanting to buy. Supply is people wanting to sell.

The price is the measure of the balance between these two forces. The price represents an average of everyone making their individual decisions. It as an old cliche to say that fear and greed are what drive the market.

What makes people afraid? They are are afraid the market will go down and their assets will lose value.

Greed? People like to be able get what they want.

Described this way it certainly seems silly to place our financial security at the whims of a fickle mob. Yet over the long run this systems works out almost all the time. Sometimes the market becomes an irrational mob. Too many people buy at once creating a bubble. Sometimes too many sell at once creating a crash.

But hopefully underneath the psychology there is something supporting the value of the market called fundamentals. Fundamentals consist of hard assets owned by a corporation and income those assets produce. When fear overruns the fundamental value that is for savvy observers of the market a buying opportunity.
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Old August 7th, 2017, 02:19 PM   #2
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The stock market is often discussed in terms of bulls and bears. Bulls being buyers and bears being sellers. More bulls than bears and prices go down. In the reverse, prices go up.

This metaphor has limitations. Sometimes When the market goes down it might be described as bears entering the market. This may not be the case. It may be buyers stayed away, not that more sellers showed up.

Last edited by webguy4; August 7th, 2017 at 06:10 PM.
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