Effective Stock Trading – A Glimpse on Investor’s Moods

The stock market is a trend-driven phenomenon. It may adopt three trends or routes. It is either bullish or bearish or range bound. A bull market is one in which stock prices are raising, while a bear market is one in which stock prices are falling. More specifically, a bear market is when the stock prices drop for a prolonged period of time, usually by twenty percent or more, while, a bull market is when the stock prices grow for a long period of time, usually by twenty percent or more. The terms bull and bear can describe investors, too. Investors, who are positive about the market’s future, are referred to as bullish investors, or “bulls,” and investors who are negative about the stock market’s future are called bearish investors, or “bears.” A range bound market has no definite upward or downward trend and tends to move within a relatively tight range for a certain period of time.

There are generally four types of investors in a stock market; we may classify them as, bull, bear, hog and sheep. A bull Investor is one who is optimistic about the market’s future. A bull investor anticipates a rising market and smartly buys the security in the hope of selling it later at a higher price. A bear investor is one who is pessimistic about the stock market’s future. A bear investor anticipates a falling market and tactfully sells the security in the hope of buying it back at a lower price. Bulls/Bears make money on their right moves. A hog investor only thinks about quick returns, blindly and whimsically. A sheep investor behaves awkwardly on account of fear or panic and demonstrates lack of initiative. Hogs / Sheep are frequent losers of their money in a market. It is interesting to note that a bull or bear may become victim of hog/sheep tendencies due to crash or chaos in the market.

Hogs are described as greedy individuals. They are unable to understand market sentiments, technicals and fundamentals. They are tempted to buy shares which they cannot afford because of their greed to make quick money. So if there is volatility in the price which happens very often, they get panic and make bad decisions. That is why they lose in the end. But if their bet is right, the shares they buy do better. They will show excessive tendency to wait till the price go maximum possible height and they often end up falling down the cliff. They plan their investment moves, rationally, in the beginning, but greed wins over reason and blurs their decisions and plans. In the end, they fall into the trap designed by smart market gurus.

Sheep are described as fearful/undisciplined individuals, so that, they are blind followers of successful investors without knowing the real basis of their success. They don’t have decision power. They just follow the investment tips. But one thing is certain; the stock market is a highly competitive field. People don’t give away effective investment tips. Real tips are not revealed, and those revealed are lousy tips. So, the tips-driven sheepish investors are slaughtered as well. They always enter the trend late and when smart investors are making their exit. So, they alone travel the slide downward.



Source by Muhammad Ilyas



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