While the individual man is an insoluble puzzle, in the aggregate he becomes a mathematical certainty. You can, for example, never foretell what any one man will do, but you can say with precision what an average number will be up to. Individuals vary, but percentages remain constant. So says the statistician.
“The Crowd” by Gustave Le Bon is one such book, which provides some deep insights about how an individual’s conscious activity gets substituted by the unconscious action of crowd.
Mental unity: Participants in the Market puts them in possession of a sort of Collective Mind which makes them feel, think, and act in a manner quite different from that in which each one of them would feel, think, and act were they would, in a state of isolation. No wonder, Einstein and Newton – both considered as geniuses, lost their individual rationality, thereby losing lot of money in front of Market’s collective wisdom.
Impulsive & Mobile: Market is often at the mercy of external exciting causes and reflects their incessant variations. It is the slave of the impulses which it receives and is inadvertently mobile.
Exaggeration and Ingenuousness: Whether the market is bullish or bearish, it leads to exaggeration of the sentiments amongst the market participants. This exaggeration of sentiments leads itself very quickly by a process of suggestion and contagion, considerably increasing its force. Also, with majority of the market participants being naïve, this unsuspecting character leads to a story bubble of stocks, thereby creating extreme oscillations of greed and fear.
Emotionality: Market is more rational than emotional. That’s precisely the reason market participants say “Bhaav Bhagwaan Che” – Market Price is God, but this is not always true!! Sometimes, the market turns more emotional than rational.
When market turns emotional (sometimes), an independent prepared investor needs to understand the emotionality of the market along with his; this is when money gets made!!!
Disclaimer: Please note that these are my personal views. While I am NOT a registered Research Analyst as per SEBI (Research Analyst) Regulations, 2014. All investors are advised to conduct their own independent research into individual stocks or industries before making any decision. In addition, investors are advised that past stock performance is not indicative of future price action.
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