[msejas]

What a lot of people seem to not understand about the stock market, is that at it's basis it's just a supply/demand ratio. When it goes down it means someone is selling a lot, someone is cashing in, at least converting it into cash.

For me it was obvious something was afoot with earnings and performance not matching the prices, I finally understand why now thanks to this article.

The fact that there are rules for institutional investors and retail investors and us in retail have so little visibility and time to keep up, just shows more and more the game is a david vs a goliath, and we are all slingless david.

[YZF]

It's more than just supply and demand. It's the price discovery. So I guess you can say supply and demand curves. The curves change with the market psychology and with future expectations.

Most institutional investors are not going to outperform your diversified portfolio. It's not like professionally managed funds are killing it while individual investors are losing. There are some specific examples of funds/people who do well but on average most do ... average.

[msejas]

Fully agree market psychology has a big influence in prices, TESLA is a great example of this.

My main point is that most people, including the media, whenever there is a big crash in prices, like silver going down double digits, they act like the money evaporated and everyone that invested lost money.

My point is that it's not the case, it dropped because there was a huge volume of people selling, making it cheaper. The people selling converted it all for liquidity, they just 'got' a lot of money in cash to spend, and they needed it or will use it for one reason to another.

Retail investors don't have the time (unless you work in finance) to read all the news and information to be aware of situations that will trigger liquidity crunches like these past few months, while institutional investors will.

My point here is you could have performed all of the value investing in the world and you are still eating losses, standard diversification theory is to put in gold when the markets are unstable, as it appreciates in time of high volatility, we are in times of extreme volatility and gold crashed, it makes no sense unless you have visibility in the institutional investing trends.

[YZF]

People lost money on paper. The loss turns real when they try to sell their assets.

Prices can drop on very low volumes. All that prices tell us is what someone agreed to buy and sell at a given point in time. Some (most?) sellers are likely selling because they are planning to buy when the price is lower (i.e. they are betting the market will go down) not because they need to use it.

Generally gold is not considered an investment or a hedge against marker instability and most diversified portfolios would not have gold in them.

Yes- if I own the S&P 500 and the S&P 500 goes down then the current value of my investment has gone down.

[msejas]

Disagree on many points, stocks are used as collateral for debt financing, their prices can definitely trigger cascade effects and losses even if not actually sold.

Overreaching arguments that sellers are like selling because they plan to buy when it's lower, no proof and a limited view, in fact in my also overreached argument I would say the opposite, most people just want to put money on an ETF and hold it until retirement, without having to touch it, they sell because something is forcing their hand and they need the liquidity to pay for something else.

Gold is definitely a hedge for inflation and market instability which is why it's had such a big run up these past few months, and they are definitely used in most diversified portfolios, yale fund as an example, (I don't know where you got this notion from)

[MichaelZuo]

You just realized pledging claims on paper with multiple degrees of seperation (stocks) for anything with a trigger mechanism, and then banking on it… is a terrible idea?

[goodmythical]

I've never understood why people separate some mystical magical "market psychology" from the traditional supply and demand model.

Like...what do y'all think demand is? From tulips and cabbage patch kids to meme coins and nfts, the price fluctuates based on semi flexible supply and highly flexible demand.

You could say "ah well, according to my analysis of the market psychology of this asset, I believe price will collapse in the medium term." but I just don't see how that's any more useful than saying "I believe demand will decrease soon" or "People aren't going to want this thing forever"

[seanhunter]

I broadly agree, but the place where psychology comes in in the continuous auction process. Just like a conventional auction, when prices start to go up, some people get overexcited and bid things up further, and conversely when people become terrified and stampede for the exits, selling assets at prices that are below any reasonable fundamental value. In the supply/demand model this is essentially the stock transitioning into being a Veblen good (where demand rises as price rises) and whatever the opposite of that is called, which is an interesting phenomenon and afaics purely psychological with no rational basis (unless you think greed/fear is rational I suppose)

That said, when people claim to distill the market psychology into a single recap or analyze the market psychology to predict future price, that's pretty much nonsense.

[skybrian]

The prices for stocks, particularly growth stocks, are very future-oriented. It’s less about what they’re doing now and more about where you think they’ll be in a few years. When we’re all reading the tea leaves, it’s not surprising that investor vibes play a role.

Current sales figures are more closely based on what people want to buy now.

[ureushegf]

Those of us calling ourselves value investors love perturbations in the market out of line with the underlying business. That’s called opportunity. Eventually the market recognizes the value. So long as you’re not playing with options or trying to get quick rich you can get rich slowly.