Fear And Greed Drive Stock Market Anyone that has taken a look at a stock chart will notice that the price pattern of a stock goes up and down.
Why does this happen though? Although information about the company, industry, economy etc is relevant, fear and greed are the primary causes.
Fear and greed are two emotions that everyone experiences, but these two emotions are the cause of stock price fluctuations in the market.
Fear Fear within the stock market causes prices to fall.
This is because when people have stocks and suddenly become "fearful" they panic, and then sell.
This emotion alone, causes prices to fall because investors are fearful of losing money on their stocks and try to sell them as quickly as possible.
"Why would they be fearful though?" Anything could lead to people becoming fearful about their stocks or the stock market in general.
An example is a top financial spokesman making an announcement in the news saying the stock market is going to crash.
People may panic and then sell quickly to avoid heavy losses.
Another example is if the economy enters a recession.
This may cause a lot of worry in the financial markets and lead to people selling their stocks.
A large amount of selling in the stock market causes prices to fall as stocks begin to lose value.
All of this, because of one emotion, FEAR.
This type of market is called a bear market, a market where prices are generally falling(just for future reference).
Greed When prices go up in the stock market, everyone gets very excited.
There may be a period where prices continue to climb and people make some very tidy profits.
People often wonder, "What makes the prices rise?".
The economy may be responsible for price rises amongst other factors, but the main reason is "greed".
When people have stocks that are rising in price, their judgement is often clouded by greed.
They decide to buy more shares expecting the price to continue rising.
This buying power in the stock market causes prices to continue rising as stocks become more valuable.
People become very greedy hoping to make large profits and this emotion causes stock prices to climb.
This type of market is called a bull market.
This is simply a market where prices are rising.
Many things can cause people to become greedy.
An example is if a company insider declares that their company is due to make record profits for the year.
People may buy the company's stock in large amounts in anticipation of a price increase.
The increased buying in the market will cause prices to rise causing a bull market.
So there it is, fear and greed.
These two emotions are the main culprits for stock prices rising and falling.
Bull markets are driven by greed as people try to obtain large profits.
Bear markets are fueled by fear.
People are desperate to minimise losses and sell their shares as quickly as possible.
Why does this happen though? Although information about the company, industry, economy etc is relevant, fear and greed are the primary causes.
Fear and greed are two emotions that everyone experiences, but these two emotions are the cause of stock price fluctuations in the market.
Fear Fear within the stock market causes prices to fall.
This is because when people have stocks and suddenly become "fearful" they panic, and then sell.
This emotion alone, causes prices to fall because investors are fearful of losing money on their stocks and try to sell them as quickly as possible.
"Why would they be fearful though?" Anything could lead to people becoming fearful about their stocks or the stock market in general.
An example is a top financial spokesman making an announcement in the news saying the stock market is going to crash.
People may panic and then sell quickly to avoid heavy losses.
Another example is if the economy enters a recession.
This may cause a lot of worry in the financial markets and lead to people selling their stocks.
A large amount of selling in the stock market causes prices to fall as stocks begin to lose value.
All of this, because of one emotion, FEAR.
This type of market is called a bear market, a market where prices are generally falling(just for future reference).
Greed When prices go up in the stock market, everyone gets very excited.
There may be a period where prices continue to climb and people make some very tidy profits.
People often wonder, "What makes the prices rise?".
The economy may be responsible for price rises amongst other factors, but the main reason is "greed".
When people have stocks that are rising in price, their judgement is often clouded by greed.
They decide to buy more shares expecting the price to continue rising.
This buying power in the stock market causes prices to continue rising as stocks become more valuable.
People become very greedy hoping to make large profits and this emotion causes stock prices to climb.
This type of market is called a bull market.
This is simply a market where prices are rising.
Many things can cause people to become greedy.
An example is if a company insider declares that their company is due to make record profits for the year.
People may buy the company's stock in large amounts in anticipation of a price increase.
The increased buying in the market will cause prices to rise causing a bull market.
So there it is, fear and greed.
These two emotions are the main culprits for stock prices rising and falling.
Bull markets are driven by greed as people try to obtain large profits.
Bear markets are fueled by fear.
People are desperate to minimise losses and sell their shares as quickly as possible.
SHARE
