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Secondary Market Player Psychology
The core of retail investors lies in repeatedly internalizing emotions such as greed, fear, luck, conformity, and loss aversion, allowing emotions to dictate their trading decisions.
1. Upward Trend: Greed takes over, fear of missing out leads to frantic chasing
• Earning more leads to wanting even more, stubbornly holding onto the last wave of profits
• Anxiety arises when seeing others making gains, blindly increasing positions and leveraging
• Self-hypnosis: This market condition is special, it will only go up and never down
2. Downward Trend: Holding on desperately to break even, cutting losses at the bottom
• Unable to hold onto profits, stubbornly clinging to losses
• Sticking to the cost price, increasing bets on rebounds as the price drops
• Mental breakdown when reaching the bottom, cutting losses and exiting at the lowest point
3. Holding Positions vs. Cash: Continuous anxiety and itching to trade
• Fear of losses when holding, fear of missing out when in cash, frequently monitoring the market
• Feeling uncomfortable without trading, engaging in blind and frequent operations
4. Decision Making: Full of cognitive biases
• Following trends and listening to news to buy stocks, lacking independent judgment
• Only believing in positive news while ignoring negative news, self-numbing
• Selling on rises and holding on during drops, gaining small profits but suffering large losses
• Second-guessing after the fact, making mistakes in practical operations
5. Standard Psychological Cycle of Retail Investors
Daring not to buy at low prices → Chasing full positions during upward trends → Frantically leveraging at high prices → Stubbornly holding during initial declines → Numbly playing dead during deep declines → Cutting losses at the bottom and exiting → Regretting re-entering after a rebound
6. Mature Trader Mindset
• Focus on probabilities, maintain discipline, and do not gamble on single trades
• Actively cut losses, treating losses as trading costs
• Do not pre-judge market conditions, respond according to rules
• Engage in contrarian operations, not following the crowd's emotions
Conclusion
Most people treat the secondary market as a casino for quick wealth, while a few see it as a business governed by rules.
The core of retail investors lies in repeatedly internalizing emotions such as greed, fear, luck, conformity, and loss aversion, allowing emotions to dictate their trading decisions.
1. Upward Trend: Greed takes over, fear of missing out leads to frantic chasing
• Earning more leads to wanting even more, stubbornly holding onto the last wave of profits
• Anxiety arises when seeing others making gains, blindly increasing positions and leveraging
• Self-hypnosis: This market condition is special, it will only go up and never down
2. Downward Trend: Holding on desperately to break even, cutting losses at the bottom
• Unable to hold onto profits, stubbornly clinging to losses
• Sticking to the cost price, increasing bets on rebounds as the price drops
• Mental breakdown when reaching the bottom, cutting losses and exiting at the lowest point
3. Holding Positions vs. Cash: Continuous anxiety and itching to trade
• Fear of losses when holding, fear of missing out when in cash, frequently monitoring the market
• Feeling uncomfortable without trading, engaging in blind and frequent operations
4. Decision Making: Full of cognitive biases
• Following trends and listening to news to buy stocks, lacking independent judgment
• Only believing in positive news while ignoring negative news, self-numbing
• Selling on rises and holding on during drops, gaining small profits but suffering large losses
• Second-guessing after the fact, making mistakes in practical operations
5. Standard Psychological Cycle of Retail Investors
Daring not to buy at low prices → Chasing full positions during upward trends → Frantically leveraging at high prices → Stubbornly holding during initial declines → Numbly playing dead during deep declines → Cutting losses at the bottom and exiting → Regretting re-entering after a rebound
6. Mature Trader Mindset
• Focus on probabilities, maintain discipline, and do not gamble on single trades
• Actively cut losses, treating losses as trading costs
• Do not pre-judge market conditions, respond according to rules
• Engage in contrarian operations, not following the crowd's emotions
Conclusion
Most people treat the secondary market as a casino for quick wealth, while a few see it as a business governed by rules.