What is market psychology?

Market psychology is the study of herd behavior and sentiment among economic actors, such as businesses, traders, or consumers. By studying the prevalence of greed, fear, or euphoria in the market, skilled traders can forecast future price movements and fluctuations in supply and demand.

What is stock market psychology?

Stock market psychology refers to the ability to identity and manage emotions and behaviors that may arise while trading. While the stock market is a forward-looking indicator for expectations around corporate earnings performance, it is often also swayed by factors which influence trading psychology on an individual and a collective level.

What is market psychology & how does it affect investing?

Market psychology is one of those drivers. The trend-following quantitative trading strategies employed by hedge funds are an example of investing techniques that rely in part on taking advantage of shifts in market psychology.