Investing Answers Building and Protecting Your Wealth through Education Publisher of The Next Banks That Could Fail
Investing Answers Building and Protecting Your Wealth through Education Publisher of The Next Banks That Could Fail

Market Psychology

What it is:

Market psychology refers to the manner in which the market reflects its participants' collective emotional state.

How it works (Example):

Peoples' perceptions of the market directly impact price movements and trends. Market psychology is the overall feeling among market participants that impels them to buy or sell. For this reason, an upward -- or bullish -- trend is associated with feelings of positive expectations expressed by optimism and hopefulness. By contrast, a downward -- or bearish -- trend correlates with feelings of pessimistic expectations expressed by anxiety and fear.

Why it Matters:

The nature of market psychology suggests that any given trend may be more indicative of market sentiment than of fundamental gains or losses in the value of stocks.

Related Terms View All
  • Auction Market
    Though most of the trading is done via computer, auction markets can also be operated via...
  • Best Execution
    Let's assume you place an order to buy 100 shares of Company XYZ stock. The current quote...
  • Book-Entry Savings Bond
    Savings bonds are bonds issued by the U.S. government at face values ranging from $50 to...
  • Break-Even Point
    The basic idea behind break-even point is to calculate the point at which revenues begin...
  • Calendar Year
    If Company XYZ starts its fiscal year on January 1 and ends its fiscal year on December...