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When it comes to trading and investing, there’s always what they call market sentiment that influences it, whereby the participants involve in the trading or investment makes a decision based on their attitude, emotions, influence or in general sentiments before performing an activity in the market.
What actually cause the movement in the market that is, the uptrend and downtrend are actually the sentiments involved and it deeply affects the crypto market. Some common factors that also affect market sentiment are natural disasters, government policies and even though these are external factors, they still play a big role in the market sentiment and also supply and demand.
In terms of decision making and what influences it are both psychological and emotional, in the market factors like greed, FUD, fear, and FOMO are what affects market sentiments. (FOMO= Fear of Missing Out) and (FUD= Fear, Uncertainty and Doubt). These are what have strong influence when traders or investors are making decisions in the market.
Depending on the level of optimism among investors or traders, the market sentiment can either be bearish or bullish. When traders are confident and hopeful in the market, the more people tend to buy therefore creating a bull market or an uptrend making prices skyrocket. When the traders or investors are not confident and hopeful in the market, the prices become bearish, downtrend, assets start depreciating and those who are more scared then sell and run at a loss.
It’s also important to note that there’s never straight up or straight down in the market but there are times where there will be downside and upside movements and also sideways action in the bull and bear market.
When it comes to decision making, the human mind tends to play tricks on us because it’s the most complex entity you can ever imagine. Sometimes the best way to learn how to control our decision making is to actually learn about the psychology of the factors that influences them.
The way people experience loss in the market is not actually because a price in assets goes down but because when it goes down, due to inexperience in the market the investor panics and sells the assets due to fear of it going down more than it has there losing everything. Well it’s a natural response and it’s normal to count your losses and sell but you have to know the potential of what you invest in before doing that.
And that’s why we need to learn how to be sceptical or skeptical and critical. Skepticism keeps us from making irrational decisions and also keeps us stable and observes the market properly before doing anything.