1) Stock market and an ocean
Little drops of water combine to make a big ocean. Similarly, market participants like you and me combine to make a stock market crowd. The Stock market is like an ocean, comprising of thousands of market participants. A drop of water cannot affect the ocean nor it can change the direction of the flow of water in the ocean. Similarly, an individual market participant cannot affect the market with his decision of buying and selling nor he can change the trend of the market. The stock market moves up and down regardless of what you want. The stock market doesn’t even know that you exist. You are like a drop of water in the stock market ocean. You cannot influence the stock market with your decisions. What you can only do is control your behavior in the market i.e use your intelligence to decide when to enter and when to exit.
It totally depends on you, what you choose to do in the ocean.
- Use the ocean’s surface to go to other places
- You can fish in it
- You can drown in it
Similarly, you choose what you do in the stock market.
- Learn and earn a profit.
- Suffer losses
- Stay away from it
2) Market participant and the sailor:-
A skilled sailor knows how to drive a boat. He knows how to control the boat during heavy waves and tides in the ocean. He cannot control the behavior of the ocean but he can control his behavior in the ocean. He studies current & weather patterns of the ocean and uses his intelligence to decide whether to sail or stay in the harbor.
Similarly, the crowd of the stock market comprises of thousands of market participants. You alone cannot change crowd mentality or you alone cannot affect the stock market but what you can do is control your behavior in the market crowd and use your mind to decide when to enter and exit.
- The crowd is stupid but stronger than you and it has the power to create trends.
- If a trend is up, you should always buy or stand aside. Never short sell, never argue with the crowd.
- You do not have to go with the crowd but it doesn’t mean that you should go with it. Use your intelligence to decide whether to go with the crowd or not.
- Respect crowd strength but don’t fear from it.
3) Crowd Psychology:-
In stock trading, you compete against some of the brightest minds in the world. The field has been designed to ensure your failure. if you allow your emotions to interfere with trading, the battle will over and you will lose.
- The stock market is a huge crowd of people. Each member of the crowd tries to take money away from other members by outsmarting them.
- In the stock market, everyone is against you and you are against everyone.
4) Winning psychology of a trader – how to sail a boat in stock market crowd.
A trader needs to understand the psychology of how the market crowd influences his mind.
- A good trader thinks for himself and makes money from the crowd.
- Learn from mistakes and try to avoid them
- Your trades must be based on clearly defined rules
- Analyze your feeling and emotions while trading
- Follow strict money management rules
Always remember, the market is not your mother. It consists of tough men and women who look for ways to take money away from you instead of pouring milk into your mouth. So trade intelligently not emotionally.
The stock market is like an ocean. You cannot control the behavior of market crowd but you can control your behavior in the market, understand crowd psychology, and use your intelligence to decide whether to go with the crowd or against it.
If you still have any doubt or questions, please comment us below and give your valuable suggestions.