For business investors, market fluctuations play a decisive role in their business investment activities; Therefore, when the market develops in a positive direction, their mood also becomes positive; and vice versa, the market moves in the opposite direction, their moods and emotions also change in the negative direction. All investor sentiment and emotions are expressed through a cycle of market sentiment. So what is the market logic cycle? Today, LSX Lawfirm will give you an article about “What is Vietnam market cyclical sentiment?“, as follows:
What is market sentiment?
Before going to learn about market cycle psychology, we need to know what market psychology is.
Market sentiment is a concept that refers to market movements that reflect (or are influence by) the emotional state of the participants. This is one of the main themes of behavioral economics – an interdisciplinary field that investigates the various factors that precede economic decisions.
In short, Market Sentiment is the overall feeling that investors and traders have regarding the price action of an asset. When market sentiment is positive and prices continue to rise, there is an uptrend (often referred to as a bull market). The opposite known as a downtrend when there is a continuous decline in prices.
What is market cycle sentiment?
The market usually starts to rise after going through a decline and depression. At this point, people started talking about long-term investing; The fear and panic mentality is no longer there, but instead, there is calmness and hope for the market’s changes in a positive direction.
On the contrary, when the market falls into a recession; a crisis; has a negative impact on business activities in the market.
In general, market sentiment cycles reflect sentiment; the feelings of investors and commodity traders towards the “price” of the asset in the market in which they are investing, or interested, prepared to invest forming a loop, each emotional hierarchy represents a level correspondence, positive and negative aspects of the market then.
These sentiments and emotions will take place in a “rotation” to different degrees in an uptrend and a downtrend.
Emotional cycles in the market:
- Incredulous
- Hope
- Optimistic
- Faith
- Excited
- excited
- Arrogant
- Fear
- Negate
- Panic
- Surrender
- Angry
- Boring
How do emotions change during market cycles?
Uptrend
Emotions in the market cycle will increase in a positive direction when the market is expanding; the value of goods increases; thereby creating an optimistic atmosphere, the relationships in business activities also become better. Often, it’s these positive emotions that lead to incremental and productive purchases.
Cyclical or retroactive effects are quite common in market cycles. For example, market sentiment is more positive when prices rise, then when prices rise; sentiment will become even more positive and drive the market higher.
Downtrend
When the market is in a positive state, the circulation of goods is stable; As asset prices rise in the market, euphoria can quickly turn into quiet gratification. When the market starts to turn the other way; Asset prices plummeted for a few reasons, market sentiment quickly turned negative, and filled with feelings of anxiety, rejection, and panic.
Finally, the downtrend stops when volatility decreases and the market stabilizes. Usually, markets undergo sideways movements before feelings of hope and optimism begin to emerge again. Such a sideways period is also known as the accumulation phase.
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Related questions
Analyzing market sentiment is an essential part of many trading strategies. Like with technical or fundamental analysis, you should generally make decisions using the aggregate of all available information. For example, analyzing market sentiment can help you investigate whether the ongoing FOMO phenomenon makes sense, or is simply the result of herd mentality. Overall, combining technical and fundamental analysis with market sentiment studies allows you to:
Gain insight into short- and medium-term price action.
Develop better control over your emotions.
Explore potentially profitable opportunities.
These methods can be mentioned as measuring the trading volume on exchanges, analyzing on-chain indicators, how the community is working with the token, what activities are the projects having, Bitcoin is doing. How is it moving, what is the current trend, etc?
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