Part. 8
Hello my dears,
even if there are no more questions about my series
"He who has the choice is spoiled for choice".
I would still like to continue the series at Easter.
Anyone interested in further episodes is welcome to leave a 👍da.
Psychology on the stock market
As we have seen again in recent weeks. The stock market is and remains unpredictable because psychology plays a major role. After all, the players on the stock market are people who influence and infect each other with their feelings and moods.
We can also see this every day here at getquin.
The mass media, from the press to radio and television to the Internet, reinforce the moods. The tabloid press in particular, with its fatal penchant for sensationalist reporting, fuels the stock market via private investors in boom times and sparks panic in crash times. And let's not forget our dear finfluencers.
It is true that some of them counter this with serious, measured reporting. But unfortunately, this is not only true in everyday life, but also in our media society:
"He who shouts the loudest makes himself heard the most".
Bulls and bears 🐻
On the stock market, the individual takes a back seat. Like in a large herd, the individual is pulled along, seemingly having little chance of breaking out of this stream. When it comes to the cardinal question of where the herd of shares is heading, up the mountains or down into the valleys, the stock market resorts to animalistic synonyms.
On the stock market, bulls and bears stand for the two major directions:
The bull embodies rising share prices, while the bear represents falling prices. The leading animals of the stock market go back to a betting game played by Californian gold prospectors 150 years ago.
For the fun of it, a bull was pitted against a bear. The bull tried to push the bear up on its pointed horns and the bear tried to push the bull down with its big paw.
This is exactly the battle that takes place every day on stock markets around the world. The bulls, the optimists, never miss an opportunity to take share prices by the horns, so to speak, and drive them upwards, while the bears, the pessimists, do everything they can to push prices down with their big paw.
For the bulls, every positive economic report confirms their optimism and prompts them to buy more shares. The bears, on the other hand, seize every opportunity to draw attention to negative economic prospects that feed their pessimism. Of course, they also try to convince as many bulls as possible of the opposite, to pull them over to the bear camp, so to speak, so that they can sell their shares.
➡️Bullish sein⬅️bedeutet in stock market parlance:
As an investor, you are optimistic, betting on rising share prices.
And ➡️bearish sein⬅️heißt:
You are pessimistic and expect share prices to fall.
The stock market goes up or down depending on who is currently calling the shots on the stock market, the bulls or the bears. Although this duel is fought anew every day, once one camp on the trading floor, for example the bulls, has clearly prevailed, the other side, the bears, may be condemned to watch from the sidelines for weeks, months or even years.
And our friend Captain 🍊 is still fueling the battle between bulls and bears every day.
It's all a matter of nerves
Just like the economic cycle, the stock market also goes in cycles. Every upswing is followed at some point by a downswing before a new upswing can begin. On the stock market, such phases can be prolonged due to mass psychological phenomena. One such phenomenon is ➡️Self-fullfilling prophecy⬅️. This means that forecasts are self-fulfilling. Simply because almost everyone believes the same thing and acts accordingly, the expected event actually occurs.
In Germany, for example, after the Wall came down, everyone believed that Western companies would now make big money in Eastern Europe. Investors bought shares in the companies in question on the basis of this Eastern European fantasy, driving share prices to unimagined heights. A bull market emerged, driven by exaggerated optimism and even euphoria at times.
Whenever there is an upward movement on the stock markets without the economic and profit prospects being able to keep pace, the financial market detaches itself from the real economy and the stock market begins to take on a life of its own for a certain period of time. Such speculative bubbles will inevitably burst one day, unfortunately without warning. The cleansing stock market crash, as painful as it is for all of us, brings the value of companies on the stock market back into line with their real value in the economy. This is how the receipt for the euphoric East German fantasy on the German stock exchange in the mid-1990s came about.
My dears, do you also see a bubble forming somewhere at the moment?
Upswings and downswings or, in stock market parlance, bull and bear markets, are therefore going hand in hand. Unfortunately, the recurring question remains unanswered:
"When does the baton change, the so-called trend reversal".
Because if you buy at the end of the boom or at the beginning of the crisis, you will make a loss.
➡️The trend is only your friend if you don't follow the trend verpennt⬅️,
is a local but apt saying of stock market players.
Ideal, but almost never achieved: buy shares at the end of the downturn, when prices are virtually at the bottom, and sell them again at the end of the upswing, when prices have peaked.
Here too, the human psyche often throws a spanner in the works of the stock market, because let's be honest:
"Who likes to leave a party when the mood has finally arisen.🥳🎉"
And who has the nerve to buy shares when the whole world is relieved to have got rid of them?
A lot of things on the stock market are just a matter of nerves!
Always between fear and greed!
Every newcomer to the stock market involuntarily embarks on a mental journey of discovery, during which moments can occur in which the stressed private investor rightly wonders whether he or she is definitely crazy. The personal experiences unfold an astonishing range, from elation to grief, depending on how your own shares are doing. In the worst case, they can literally rob you of your last sleep. In addition to material exhaustion, there is also psychological exhaustion.
So, my dears, let me take this opportunity:
➡️Für everyone should bring a good dose of coolness to the share business.⬅️
The first mental stress test begins with having to choose a few shares from the many on offer, especially from my own ideas. At the same time, this excludes many others that could also be considered. If these stocks turn out to be the real favorites afterwards, the annoyance is twice as great. Perhaps one reason for my large number of positions 🙈😂.
Constantly monitoring share prices quickly becomes a test of patience for a beginner. If prices fall instead of rising, the first signs of panic appear. Self-doubt spreads:
Have you backed the wrong horse after all or caught the completely wrong time?
You tensely follow all the economic news, secretly scanning it for factors that could influence the share price. But even if your own share price is rising, there are of course always shares that are doing better. Instead of a sense of victory, this can still lead to a hangover 🙈.
To make matters worse, we often remain alone with our heartache. While others in the community post their successes here. We don't want to bother friends and acquaintances for fear of gloating and we don't want to worry family members unnecessarily. The most difficult decision is still to come:
When is the right time to sell your shares again?
Even if you make a profit, something is bound to go wrong in the end. Either you sell too early and the share price simply continues to rise. Or you sell too late, i.e. some of the accumulated profits have already been taken by others before you. In either case, you are annoyed instead of enjoying the first price gains. But there is a consolation for all newcomers to shares - even for those who start with losses:
"After all, more self-knowledge is already a gain"
My dears, it's gotten a bit long again. But maybe you'll find some time over the holidays. Of course, I would also be very happy to receive comments on whether you liked it.
On Thursday, I sent the bulls from the community (@Simpson
@Max095
@Dividendenopi
@Get_Rich_or_Die_Tryin ) to the stock exchange in Frankfurt to chase away the bears.
But now I wish you a few stress-free Easter days!