Every traders carries with them an emotion that essentially becomes their guiding principle while trading in stock market in the long run. The dynamics of the stock market are driven by the quantum of this emotions generated by the traders. This is what makes the stock market very volatile in nature making it seemingly unable to avoid risk and future uncertainties. This uncertainties makes the market even more speculative and in turn making the emotions of the trader unstable creating an imbalance in the stock market. This imbalance is the cardinal principle of stock market viable to thrive on traders emotion.
What is the emotion am I talking about in the context of stock market? Specifically there are two emotions of a stock trader i.e. Fear and Greed. Fear creates supply and Greed creates demand. Every trader trades in different kinds of stock in the market depending on the availability of capital to invest in a particular stock. The fall in the share value of that particular stock creates a fear in the mind of a trader which propels them to sell the shares they hold creating a supply in the stock market. Conversely, a trader senses the rise in the share prices of a particular stock start investing generating a demand in the stock market. The former group who are pessimist are commonly known as Bearish and the later group of trader who are optimistic are known as Bullish. The buying and selling of a stock works in an inverse relation.credit: third party image reference
However, the paradigm of trading in stock market has evolve with the revolution in science and technology. The modern approach of trading in stock market has completely change the modus operandi of this market. But to start, it is imperative that one understand the dynamics of the market fully before giving oneself a go ahead to trading. The most difficult part is analysing the emotions of a trader. This is imperative to get the clear picture of the market without which any trader is bound to fail in the long run. Luck comes after hard work when it comes to stock market. You need to invest your time resourcefully and have the presence of mind to capture what is happening currently in the market (this includes the market as a whole). This will give you data that defines the state of a market which is very much needed to analyse the stock market. To trade in stock market you need to be well informed which will help you to take a calculated risk so you can start picking sides which will give you higher returns, Fear or Greed.