Fear & Greed

Markets are driven by the collective decisions of human beings. When we remove technical analysis and fundamental data, what remains at the core are two primal emotions:

• Fear: Causes panic selling, often driving prices below their true intrinsic value. This creates opportunities for contrarian traders to buy when everyone else is fleeing.
• Greed: Causes "FOMO" (Fear Of Missing Out) and irrational buying, often driving prices to unsustainable, parabolic heights. This creates opportunities for traders to take profits and wait for a inevitable pullback.

Market cycles typically follow a predictable path fueled by these emotions:

Optimism → Excitement → Thrill → Euphoria (Greed) → Anxiety → Denial → Fear → Desperation → Panic (Fear) → Capitulation → Despondency → Hope → Relief → Optimism.

Understanding where you are in this cycle is crucial. If you feel "euphoria" about a trade, it is likely the wrong time to buy more. If you feel "panic" and want to sell everything, it might be the best time to look for a reversal.

You cannot eliminate fear or greed—they are part of being human. Instead, you must systematize your actions so that you act on pre-defined rules, not raw emotions. When you feel an intense emotion during a trade, it is a signal to pause and check your rules, not a signal to act.