The psychology of the masses - what does a single trader think

Psychology of the masses. Many traders swim with the current. This is what test & evaluation say about the trend-following strategy. Compare your chances now.

Anyone who has been dealing with trading for a while will not be able to avoid dealing with the subject of mass psychology. That is part of Bahavioral Finance. An area that has only established itself as an independent area of ​​investing in recent decades.

Bahavioral Finance mostly deals with the question: How rational does an investor really behave? It has already been proven that he does not in most cases. The investor appears to be emotionally active, especially if he is already invested.

Traders can determine this for themselves by asking themselves what they think more about while trading. The analysis made previously or the current trade and how much profit or loss has already arisen. Most of the time it will be the latter which is truly not a sign of rationality. But what is the reason for this irrationality?

Masses are like a herd that seems uncontrollable.

The problem why a trader often does not recognize that he is only part of the mass is that Traders often act alone in the "closet". For them as individuals it is a contradiction to see themselves as part of a crowd. They prefer to see themselves as someone who stands out from the crowd.

This is counterproductive, because it promotes action against existing trends. Once the crowd has started moving, you shouldn't stand against it. The fact is that a crowd really doesn't act rationally anymore, in order to get closer to this fact, you should imagine a very large crowd, not just a simple gathering of people, but an amount that is so tight that it can only move as a mass, because a lot that hardly offers freedom of movement for a single person is exactly what happens on the stock exchange. This set can then only move as a large unit. Individuals, on the other hand, don't arrive because the crowd is too strong, and what's more is the irrationality of this crowd. If she has started to move in one direction, then this movement will be maintained simply because it is the easiest way for her to move. Rational decisions are no longer made, but self-dynamics without reason arise.

Especially in panic-like movements, as has often been seen in reality, there are accidents that perhaps not a single person wanted has, but just could not defend itself against the flow that arises. On the stock exchange, the saying "you should never reach into the falling knife" often falls. This could also be roughly equated to trading against the trend and thus the herd.

The psychology of the masses - what does a single trader think


Mass psychology is an interesting field that has only entered trading in the last few decades has found. It is definitely advisable to deal with the topic, as it sensitizes you to an understanding of the irrationality in the markets. Above all, there is less misunderstanding when a trade runs against you and you want to be smarter than everyone else by acting against the actual trend, with mass psychology having a particular effect in a panicky environment, for example in the form of crash. The best example is the current stock market crash in China. Although the Chinese central bank tries everything possible to support the markets, the markets continued to fall, and a herd that has only started to move can only be stopped when the majority is out, i.e. the quantity is no longer so tight, For the individual investor, it mostly means "follow the trend and be part of the quantity".

The broker BD Swiss is one of the brokers that has been active on the market for several years. Traders can trade trends well with it.

The psychology of the masses - what does a single trader think

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