Market Psychology

What is Market Psychology? Market psychology refers to the prevailing sentiment and emotional state of investors in the financial markets.

Explanation: Market psychology drives market trends and price movements, often leading to phenomena such as bubbles and crashes. Understanding market psychology helps traders anticipate market reactions and make informed decisions.

Practical Example of Market Psychology: During a market rally, positive market psychology can drive prices higher as investors become increasingly optimistic. Conversely, during a downturn, negative psychology can lead to panic selling and further declines.