In trading and investing, greed and fear are the two faces of the same coin. Whether you are trading crypto, forex, options, or stocks, these two ideas have an influence on you and they change their decisions. Both of these have resulted in a lot of losses for people.
Greed and Longing the top
When the market is bullish and printing green candles, people tend to become greedy. During those times they invest more and more in hope of huge returns from their investments. Greed overtakes them; they don’t take profits from their positions because according to them they will miss out on the run. Market sentiments play an important part in trading. Big traders and successful people take caution during these times. It has been previously seen that during extreme bull runs market shifts their structure and a lot of people get liquidated at the top. “Don’t Long the top” is something you should get in your mind. People get FOMO; they think that they are going to miss it. But once they enter it, the market is already at the top and now is due for a correction.
Dips are a gift, buy them
Similarly when the market is bearish and cryptos are bleeding, fear overtakes people. During these times, the first priority of these people is to preserve their capital. This is why when fear takes over the general audience and investors; they get out of the market as soon as they can. Even when suffering losses, they take their money out because they think that the current market conditions are far worse and the more they stay the more losses they are going to suffer. Potentially professionals consider these as buying opportunities and invest during the dips. FUDS propagate fear in the market. Professionals who know the true nature of FUDs buy the dips that have resulted because of the fake news.
Greed and Fear Index
Greed and fear Index has been created, although it doesn’t give you accurate results, it does give you a general sentiment of the market. Social media talks, dominance, volatility, volume/momentum, dominance, and trends, all of these things can be taken into account to get an idea about the current market conditions.
As a trader learning to control our greed and fear is important. Taking profits is an essential part of becoming successful. Similarly controlling fear is also important. Selling your assets in red isn’t a good idea most of the times.
