The Psychological Crowd
The Psychological Crowd
This chapter focuses on the concept of emotionalism (decision-making based on emotions), examining particularly how it may lead to market losses. The fundamental characteristic of a crowd is that it is exclusively guided by unconscious motives or emotions. Man is extremely uncomfortable with uncertainty; thus, they try to make certain all the circumstances of their lives; in doing so, they succumb to the herd instinct—an action without centralized direction. This uncertainty about the future also elicits two primary emotional responses: hope and fear. People hope the future will turn out well, but they fear that it will not. Also, they always take these emotions to extremes and apply the two emotions in the market environment, eventually leading to market losses.
Keywords: emotionalism, market losses, unconscious, uncertainty, herd instinct, hope, fear
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