When you start getting acquainted with the financial market, the phrase you will hear a lot is “Market sentiment. So do you understand what market sentiment is? Are there any indicators or tools to measure sentiment? How to know what stage the market sentiment is in and how to apply it to the cryptocurrency and stock market The answer is that there will not be a specific market sentiment indicator Instead, each investor needs to keep an eye on what’s going on in the market in general.Besides, keeping up to date with the latest news also helps a lot in the process of traders determining the most common emotions of traders. Let’s learn about the steps of market sentiment during an up/down cycle of financial markets in the article below.
Market psychology simply understands it reflects the attitude of the majority of investors towards an event, movement, news (increase or decrease, good or bad) about a token, a cryptocurrency. any element or the market as a whole. It’s like emotions form a dominant rhythm to price action. Market sentiment is like personal emotions that can change rapidly for different reasons, as it is influenced by different thoughts, feelings and actions. The key point here is that market sentiment is not easy to predict because it is based on investor emotions. But each person has a different perspective on the same thing, so the transaction action is also different. One person may choose to buy in while another choose to sell. Which side prevails over that side will determine the market sentiment.
In the financial market in general and especially in the cryptocurrency market, the market sentiment chart is very widely used. Let’s take a look at investor sentiment at each market stage in the Bitcoin and crypto markets.
The new cycle of a bull run begins at the end of the previous cycle (the bottom of the previous drop) when, after a long-term bear market, the market starts to grow again. At this stage, the psychology of investors began to contain many doubts about the market’s signs of growth again. Many people call this a period of mild growth and others consider it a lie and do not believe that the market can rise again. That is the first sentiment that arises in the new cycle of the price line. Doubt phase.
Taking a specific example of BTC when it fell from the top of 17,000 usd to more than 3,000 usd and rose again to 6000 7000usd, many investors were very skeptical but did not believe in this growth.
After having hit the previous bottom, the market showed some clear signs of recovery and there were slight increases, investors started to have hope in the market. Investors are beginning to believe that the market will recover, but this belief is uncertain. During this period, market prices began to have stronger growth spurts, corrected and continued to increase stronger to reinforce hope for investors. Everyone hopes the market will recover to some level. It is the Hope psychology – the second psychological phase of the market sentiment cycle
The market continues to grow for a longer time, leading to better psychology of investors. Investment has returned to the market but there are still some doubts about growth at this stage so investment volume will not be strong. This phase is like when BTC broke the old high of $20,000. Investors are starting to believe in the growth cycle again but remain skeptical.
A little skepticism of investors will be convinced as the market continues to grow and make new highs. Now that people will gradually believe that the bull cycle has really come, market players are increasingly focusing on investing and looking to invest more in the market. The stage has been entered: Trust
As the price continued to grow, the investor had a certain return on his investment. Happy mentality, results will prevail, The higher the price, the more excited they are, not only investing more in the market but also introducing relatives and friends to invest and create a new number of investors . This is also the time when a series of new investors flocked to the market, the media channels also reported a lot about the market, attracting more investors. The market is getting stronger. Mentality excited
When many investors rushed to buy, the market reached a very high price and was much higher than some people expected. The price from optimistic to euphoric increased continuously and had very few corrections. At this stage, most of the investor’s previous investments are profitable and any investment is profitable. People often tease each other “Everyone is happy, family is happy”. At this time, many people still continue to buy, continue to invest and think that profitable investment is a sure thing. This period is the peak of the growth spurt.
At the beginning of a slight decline, investors still arrogantly believed in their previous investment. And the corrected price is thought by investors that the corrected price will continue to rise again and will go higher and continue to buy more. This stage of psychology is called Arrogant
At this time, the price continued to go down, not continue to increase after the correction. A lot of margin and futures orders were liquidated as the price continued to go down more than expected. However, confidence remains and people still paint a bright future that will rebound at least to the buy point. Although the current market is still receiving a lot of good news, once it is in a downtrend, the price will continue to go down. This stage appears psychological Fear
Although the price continues to fall, at this stage, investors still cannot accept that the market has peaked and the downtrend has begun. They still think that the projects they invest in have great potential and will continue to grow.
Prices continued to fall, and those who still kept their portfolios began to panic as their losses gradually increased. Most people who bought at the high price up to this point would panic and sell their investment at a loss if it is still holding up.
The last holders after the panic still see the price go down and a lot of sellers will not be able to bear the loss anymore selling all their investments and not being able to hold any more. It’s better to keep as much as you can than to lose it all.
Those who continue to hold without selling will become indignant and protest. They will continue to ask questions like why are there still sellers with such low prices? Many good news but the market is still going down is why? Or why doesn’t the government ban market manipulation? …
At the beginning of 2018, after a deep bear market, a lot of criticism was directed at analysts. There are even people who are even criticized for being labeled a fraud.
When the market has bottomed out and continues to fluctuate very small at this level, it will make the last people in the market depressed and desperate for the market. And this is also the final stage of the old market cycle and the beginning of a new market. There will be exits, there will be doubts about whether the market can recover or not. And another cycle is about to begin.
Going through the phases of the market cycle above will help newbies better understand the stages of the market as well as the development of sentiment in the market. When you go through and look back, you will also see how your mentality in each stage. When you have a clear understanding of market psychology, it will be easier for you to judge the direction and psychology of the majority of investors, thereby making the most informed decision for yourself.
Good luck with your investment!
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