PsychologyBeginner7 min read
The Fear and Greed Cycle: Recognizing Your Biases
Markets move in cycles of fear and greed — learn to spot them before they catch you.
Key facts
- Greed makes you chase tops; fear makes you sell bottoms.
- The crowd is usually wrong at extremes.
- Recognize the feeling before you act on it.
- Discipline beats intuition in the long run.
How greed shows up
You start skipping stop-losses, increasing position sizes, and entering trades you don't understand because 'you don't want to miss out.' This is exactly when markets often reverse.
How fear takes over
After a loss, you want to sell everything, avoid the charts, and swear off trading forever. This is usually near a point where more rational buyers are stepping in.
Your defense: a pre-written plan
When you feel strong emotion, your prefrontal cortex (the part that makes decisions) goes offline. That's why you need a plan written when you're calm.
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