The markets move in cycles, and understanding the psychology of these cycles helps traders stay disciplined, manage risk, and make smarter decisions. The cycle consists of several stages:
* Euphoria: Prices rise, confidence increases, and traders flock in.
* Satisfaction and Anxiety: Momentum slows down, and doubt creeps in.
* Capitulation and Reevaluation: Prices fall, leading to cautious decision-making.
* Hope and Recovery: Sentiment stabilizes, and traders look for new opportunities.
Understanding these cycles helps the trader make sound decisions, avoid emotional decisions, focus on their trading plan, and manage risk.
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