Investing is a field filled with opportunities and challenges, especially when it comes to managing emotions. One crucial aspect that often gets overlooked is the psychological market cycle. This concept not only helps you recognize personal emotional patterns but also sheds light on how collective emotions influence market movements. This article explores the psychological market cycle, how emotions impact investment decisions, and how to manage them for smarter investing.
The psychological market cycle refers to the interplay between investor emotions and market movements. During each market cycle, collective emotions shift from optimism to euphoria, then to fear and despair, before returning to optimism. These emotional patterns ripple through the market, influencing the prices of assets like stocks, real estate, or cryptocurrencies.
1. Optimism
Investors start buying assets with hope for future profits. The market shows early signs of recovery.
2. Euphoria
This is the peak of the cycle. Overconfidence dominates, and investors believe prices will rise…
